Investors have witnessed all sorts of history since the beginning of 2020. For instance, stock investors navigated their way through the quickest decline of at least 30% on record for the benchmark S&P 500 (it took about a month). They've subsequently enjoyed the most robust bounce-back rally from a bear-market bottom, with the S&P 500 taking less than 17 months to double.

However, it's cryptocurrency investors who have the most to crow about. Since the aggregate value of digital currencies bottomed at $141 billion in March 2020, it's grown more than 15-fold to $2.27 trillion.

While the biggest names in crypto, Bitcoin and Ethereum, have provided the biggest nominal boost in market value, it's the ultra-popular Shiba Inu (CRYPTO:SHIB) that's jaw-dropped investors with its 2021 return.

A Shiba Inu dog lying on its side and looking up.

Shiba Inu-themed crypto coins have been a big hit in 2021. Image source: Getty Images.

Shiba Inu made investors millionaires from pocket change

When the curtain opened this year, a SHIB token could be purchased for a minute $0.000000000073. But over the past 11 months and change, six of those zeroes have disappeared. As of late evening Dec. 5, Shiba Inu coin had returned nearly 49,000,000% year to date. Put into context, an investment of just over $2 at midnight on Jan. 1 would have made you a millionaire. That's a return unlike anything we've ever seen before.

Shiba Inu's historic gains are the result of numerous factors. For example, SHIB has benefited immensely from increased visibility. More crypto exchanges than ever have listed it for trading, and the Shiba Inu community recently surpassed the psychologically important 1 million hodler mark, according to wallet address data on Etherscan. To boot, Shiba Inu has been better at generating social media buzz than just about all other cryptocurrencies.

We've also witnessed coin burn come into play. The mysterious founder of Shiba Inu, known as "Riyoshi," gifted the co-founder of Ethereum, Vitalik Buterin, about half of the 1 quadrillion token supply. Not wanting that sort of control over Shiba Inu's future, Buterin donated 50 trillion SHIB to the India COVID-Crypto Relief Fund and burned approximately 410 trillion tokens by sending them to a dead blockchain address. In theory, fewer coins in circulation makes each remaining token that much more valuable.

Shiba Inu's impassioned investors are also enthused about upcoming projects and merchant wins. There's the ongoing development of layer-2 blockchain Shibarium, game development that'll incorporate non-fungible tokens (NFTs), and the landing of movie theater chain AMC Entertainment and tech-retailer Newegg Commerce as merchants that'll accept SHIB as a form of payment.

A visibly worried person looking at a plunging crypto chart on their computer screen.

Image source: Getty Images.

It's time for a reality check: SHIB is probably going to face-plant in 2022

Though it might seem as if Shiba Inu is an unstoppable force in the cryptocurrency space, the reality is that it's set to have a really rough 2022. Below are three reasons Shiba Inu just might be the worst-performing ultra-popular digital currency next year.

History suggests an epic reversion is already underway

The first reason to be highly skeptical of the world's hottest cryptocurrency is history.

Life-altering gains are nothing new in the crypto space. When I examined the performance of other popular payment coins, I was able to find quite few that gained anywhere from 24,000% to 461,000% in a stretch of roughly 10 months to 30 months. The problem is that following the peak for each and every one of these payment coins, investors saw the value of their tokens decline by between 93% and 99% over the subsequent 12 to 26 months.

Shiba Inu is an even more extreme case. At its all-time intra-day high on Oct. 27, SHIB tokens had gained more than 121,000,000% on a year-to-date basis. Considering that this gain is far and away bigger than any other short-term move in the crypto space, the expected reversion here should be equally epic.

It's worth nothing that, at the time of this writing, SHIB was already down nearly 60% from its all-time high set less than six weeks earlier. This looks to be just the beginning of a significant downtrend that could extend throughout 2022.

A businessperson pressing the sell button on a large digital screen.

Image source: Getty Images.

Popularity and visibility can work against SHIB

Another reason Shiba Inu coin could face-plant next year is its own popularity.

Up until now, SHIB has been aided by a growing number of cryptocurrency exchanges listing its token for trade. More listings means improved liquidity, greater awareness of the coin and project, and often a larger community. The impassioned "SHIBArmy" strongly believes that new listings are critical to growing their numbers well beyond 1 million hodlers.

What's often overlooked with obscure cryptocurrencies that have recently stepped into the spotlight is they almost always benefit from an inherent buy bias. Although most cryptocurrency exchanges do support short selling digital currencies, this function is typically only allowed for the best-known tokens. Whereas big money institutions can utilize derivatives in the futures market to place bets against Bitcoin, it's a lot tougher, if not impossible, to bet against, say, the 125th-largest cryptocurrency by market cap. As Shiba Inu coin rose in the ranks, short-selling it was difficult, if not impossible.

But as Shiba Inu grows in popularity, the avenues to bet against it increase, too. With each new exchange listing comes another opportunity for pessimists to place their bets against the high-flying and unproven Shiba Inu. In other words, its own popularity is going to work against it in 2022.

A messy pile of gold-colored coins set atop a smartphone displaying crypto quotes and charts.

Image source: Getty Images.

Coin burn won't be a prevailing upside catalyst

A third and final reason Shiba Inu could be the worst-performing cryptocurrency among the most popular tokens next year is a lack of meaningful coin burn.

As noted earlier, coin burn is somewhat similar to publicly traded companies repurchasing shares of their common stock. Having fewer shares outstanding makes each remaining share that much scarcer. When Vitalik Buterin sent around 410 trillion coins to a dead blockchain address, around 41% of the 1 quadrillion coin supply was permanently removed from circulation in the blink of an eye.

Here's the thing: Even though some merchants that accept SHIB are using a percentage of their profits to burn additional coins, the effect of coin burn moving forward is going to be greatly diminished compared to what happened when Buterin made around 41% of the token supply disappear in the click of a button.

With around 549 trillion SHIB remaining, ongoing coin burn simply isn't going to move the needle enough in 2022 to make a difference.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.