If you think the stock market has delivered big gains since the pandemic bottom in March, take a gander at the cryptocurrency space. Over the past 20 months, the aggregate value of digital currencies has soared from $141 billion to $2.5 trillion, as of Nov. 18.
On a nominal basis, Bitcoin and Ethereum are most responsible for pushing the aggregate value of cryptocurrencies higher. After all, this dynamic duo accounts for more than 62% of the $2.5 trillion market cap for crypto. But based on jaw-dropping percentage gains, it's meme coin Shiba Inu (SHIB 1093.63%) that's led the charge.
The world's hottest cryptocurrency looks poised for a major pullback
In late October, Shiba Inu hit what's currently its all-time high of $0.00008841 per token. That might not sound like much, but it represented a gain of more than 17,300,000% from its debut day less than 15 months earlier (August 2020).
How does any investment gain over 17,300,000% in such a short time frame? In no particular order, Shiba Inu has benefited from:
- More crypto exchanges than ever accepting it for listing.
- The fear of missing out (FOMO) encouraging investors to chase SHIB higher.
- The launch of decentralized exchange ShibaSwap, which is coercing longer hold times.
- Landing movie theater chain AMC Entertainment as its first major merchant.
While these "wins" might sound tangible, the reality is that SHIB has been hyped by its community on social media and offers little lasting substance. For instance, only 138 merchants worldwide accept SHIB as a form of payment, according to online business directory Cryptwerk. What's more, with Shiba Inu being an ERC-20 token built on the Ethereum network, it's tied to the same high fees and lag times that can impact Ethereum.
Additionally, history has shown that high-flying cryptocurrencies get clobbered after hitting their respective peaks. When I examined how three payment coins performed after netting five-and-six-digit percentage gains over a short period, I found they declined by 93% to 99% within the following 26 months. Chances are good that Shiba Inu could be pummeled over the next year, if not longer.
These cryptocurrencies should be worth more than SHIB by this time next year
As of Nov. 18, Shiba Inu was ranked as the 11th-biggest cryptocurrency by market value ($23.5 billion), according to CoinMarketCap.com. But between an expected decline in SHIB's value and the real-world potential of digital currencies currently ranked below it, this crypto duo could very well be bigger than SHIB by this time next year.
Currently ranked 24th, with a market cap of $8 billion, Stellar (XLM 79.55%) looks to have a very good chance to eclipse Shiba Inu's market cap a year from now.
What makes Stellar so exciting is its ability to vastly improve cross-border payments. With existing payment infrastructure, it can take up to a week for cross-border payments to be validated and settled. It's an inconvenience that businesses and consumers have been accustomed to for decades -- but it's possibly resolved with blockchain technology.
With Stellar, fiat currency can be turned into Lumens (XLM), the protocol token of Stellar's network, transferred anywhere in the world, and turned back into a fiat currency of choice. To do this takes just 4 to 5 seconds and costs only 0.00001 XLM. In other words, it would take about 305,000 transactions before a mere $1 in fees were racked up.
Also, as you probably gathered from this data, Stellar is a rapidly scalable network. Its developers have claimed the network can handle 3,000 transactions per second (TPS). For context, Bitcoin and Ethereum are handing a respective 7 TPS and 13 TPS.
The icing on the cake here is that Stellar has demonstrated its real-world use. While SHIB is virtually useless outside of a cryptocurrency exchange, Stellar partnered with a dozen major banks in the South Pacific region all the way back in 2017 to handle cross-border payments. It's a good bet to be a more valuable digital currency than SHIB.
Another cryptocurrency that has all the tools necessary to surpass Shiba Inu and leave it firmly in its dust is Algorand (ALGO 18.45%), which ranks as the 20th-largest digital currency by market cap ($11.1 billion).
The way I see it, two aspects should give Algorand plenty of real-world appeal. First of all, it offers a refined proof-of-stake consensus mechanism. Rather than relying on the energy-intensive proof-of-work model that Bitcoin employs, or the standard proof-of-stake model that has the potential to be corrupted by smaller players, Algorand deploys what's known as pure-proof-of-stake (PPoS). With PPoS, users are chosen at random to propose blocks and vote on proposals. It's a step up in decentralization that'll ensure a high level of security.
Second, Algorand's developers have made blockchain interoperability a focus. At the moment, most smart contract-focused blockchain are unique, which confines decentralized applications (dApps) to the blockchain they're hosted on. This is to say that it would be difficult, if not impossible, for businesses to transfer data, files, or capital between each other if utilizing a unique blockchain network. Algorand's blockchain interoperability bridges these differences, which frees developers up to do more with dApps and financially focused projects.
As one last note: Algorand is fast. On Nov. 18, the network offered a block finality of 4.38 seconds and was processing more than 1,100 TPS. In English, it means Algorand is completing transfers on its network in less than 4.4 seconds, and looks to be capable of 66,000 transactions per minute. It deserves to be worth far more than Shiba Inu given its real-world potential.