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Shiba Inu: Bull vs Bear

By Keith Speights and Rich Duprey – Dec 11, 2021 at 12:55AM

Key Points

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Here are two different views about the prospects for the high-flying cryptocurrency.

Shiba Inu (SHIB -1.19%) is on track to deliver a gain of more than 70,000,000% in 2021. But can the digital token move even higher? Here are two starkly different views about the prospects for Shiba Inu. 

Bull case: Big potential catalysts on the way

Keith Speights: There are several downsides to buying Shiba Inu. However, there are also several major potential catalysts on the way for the cryptocurrency. And those catalysts just might outweigh the downsides.

A Shiba Inu dog standing on sofa next to a person looking at a laptop.

Image source: Getty Images.

You can lump the catalysts into one of two categories. First, Shiba Inu could enjoy expanded mainstream acceptance. And second, new developments could reduce some of the negatives for the cryptocurrency.

There's a real chance that Robinhood could add Shiba Inu to its trading platform in the not-too-distant future. Sure, Robinhood executives are taking a cautious and slow approach with adding new digital coins. But there's growing popular support for including Shiba Inu. Don't be surprised if Robinhood bites the bullet sometime in 2022. It's also possible, and perhaps even likely, that more merchants will support SHIB over the next year or so.

Look for the launch of Shibarium, a layer-2 blockchain project, in 2022 to help slash the transaction fees associated with Shiba Inu. Also, the rising use of the ShibaSwap decentralized exchange could elongate the average holding periods for SHIB. If so, not only could the token's volatility decrease, but Shiba Inu could further cement itself as a top cryptocurrency that's not going away.

Bear case: You'll wake up with fleas with this dog

Rich Duprey: Generating million-percentage point returns is no easy feat for any crypto not named Bitcoin , yet Shiba Inu has done just that, posting monster gains in record time. Created in August 2020, its market cap is already over $19.4 billion and it has become the 13th most valuable coin out there (though rankings shift almost daily). 

For all of its raging popularity, though, SHIB has some serious flaws that can't be overlooked. For one, it's really not accepted anywhere. A little over 370 merchants worldwide accept the coin, compared to the 7,600 that will accept Bitcoin or the 3,700 that will take Ethereum .

Although it has to do with its relative newness, it's also because it's expensive to use SHIB. While AMC Entertainment recently made headlines by saying it would accept the coin as payment at its theaters, it's more of a symbolic gesture than a practical one. It will cost a user significantly in transaction fees while also triggering tax reporting.

But it's also because investors aren't buying SHIB as a store of value, but rather as a trading mechanism. The average holding time is just 34 days, versus 74 days with Bitcoin, 71 days with Cardano and Ethereum, and 93 days with Litecoin

What has driven Shiba Inu's valuation is more a combination of meme investing mania and the fear of missing out. Where Bitcoin is purposefully scarce, Shiba Inu wants to be everywhere and has littered the market with almost 550 billion coins. Yet those forces can work against it too, and the coin is down by nearly 60% from its recent highs.

There are just many other coins available for use that offer lower fees and faster settlement times, so that despite its prominent profile, better alternatives should and likely will be utilized. 

Two certainties

Are Shiba Inu bulls or bears more likely to be right? There's no way to know for sure. However, there are two certainties with this high-flying cryptocurrency.

First, there's no way that Shiba Inu will be able to keep delivering the kinds of gains that it has so far. Second, buying the digital token is a risky proposition. 

On the other hand, there's also another thing we can know about Shiba Inu: It's defied expectations in the past. Maybe it will continue to do so. And maybe it won't.

Keith Speights has no position in any of the stocks mentioned. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.

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