Over the past 21 months, the stock market has made history. The more than doubling in the S&P 500 since March 2020 represents the strongest bounce back from a bear-market bottom of all time.
However a gain of a little over 100% is peanuts compared to what cryptocurrencies have brought to the table. Over the same 21-month stretch, the aggregate value of digital currencies has rocketed more than 15-fold to $2.28 trillion, according to data from CoinMarketCap.com.
While the usual suspects have played a key role in pushing the nominal value of all cryptocurrencies higher -- I'm looking at you, Bitcoin and Ethereum -- it's meme coin Shiba Inu (SHIB -27.14%) that's stolen the spotlight and delivered a truly historic gain.
Shiba Inu has delivered once-in-a-lifetime gains in under a year
When the year began, SHIB tokens had a whopping 10 zeroes after the decimal point ($0.000000000073). But as of Dec. 9, those same coins could be purchased on crypto exchanges for about $0.000035. In the process of losing six zeroes, Shiba Inu returned more than 48,000,000%. While this is down from a peak year-to-date gain of 121,000,000%, it still means that an investment of just over $2 on Jan. 1 would have made people millionaires.
The list of catalysts that have lifted Shiba Inu is long. In no specific order, SHIB has delivered once-in-a-lifetime gains because of these factors:
- A growing number of crypto exchanges have listed SHIB for trading. New listings mean improved liquidity and an opportunity to grow the Shiba Inu community, which recently surpassed 1 million hodlers, per Etherscan.
- The launch of decentralized exchange ShibaSwap in July 2021. ShibaSwap allows investors to stake their coins, thereby providing an incentive to hold onto their SHIB for a longer time frame.
- Ethereum co-founder Vitalik Buterin "burned" approximately 410 trillion SHIB by sending them to a dead blockchain address. In theory, this makes each remaining coin that much scarcer.
- Tweets from the world's richest person, Elon Musk. Musk adopted a Shiba Inu-breed dog this summer, and he's been posting Shiba Inu-themed memes for an even longer period of time. Even though these tweets have nothing to do with Shiba Inu, his tweets are often conflated as a buy signal for SHIB hodlers.
- A lack of channels to bet against (i.e., short-sell) Shiba Inu. While it's easy to bet against the biggest names in crypto, this isn't the case with Shiba Inu.
- The expectation of Shibarium launching in 2022, and blockchain-based gaming not long after.
Could Shiba Inu fall 99%?
But in spite of these positives, the world's hottest cryptocurrency looks destined to undertake what might be one of the biggest reversions we've ever witnessed in the cryptocurrency space. I'm talking about the potential for SHIB to decline at least 99% from its record high of $0.00008841.
In particular, there are two factors working against SHIB that'll be virtually impossible to overcome.
Precedence will weigh heavily on Shiba Inu
The first issue for Shiba Inu is its mammoth gain of more than 48,000,000% in such a short time frame. Though the fear of missing out (FOMO) and social media hype can encourage investors to overlook the potential of a reversion in a high-flying security, the precedent has been set within the cryptocurrency space that life-altering gains are met with equally stunning reversions.
As an example, payment network Nano (NANO -6.38%) was an absolute stud for investors when virtually all cryptocurrencies moonshot higher in December 2017 and the first week of January 2018. In a 10-month stretch, NANO tokens rallied from below $0.01 to hit almost $34 per token. Peak to trough, we're talking about a greater than 461,000% increase.
But in the two years that followed, Nano would go on to lose 99% of its value, with NANO tokens ultimately retreating to less than $0.35.
If you think I'm singling out or picking on Nano to prove a point, keep in mind that I've highlighted it recently as one of the most intriguing blockchain-based payment networks. Nano is a fee-less payment platform that transfers payments faster than most financially focused blockchain projects. It simply got way ahead of itself in early 2018, even with its competitive advantages.
We've witnessed similar falls from grace from other payment coins. For instance, privacy coin Verge gained almost 1,200,000% in 2017. After briefly surpassing $0.30 per XVG token on an intra-day basis in Dec. 2017, Verge sunk as low as $0.0017 in March 2020. That's a decline of about 99.4%.
The point is this: The bigger the short-term gain in the cryptocurrency space, the larger the eventual reversion.
With Shiba Inu logging a gain of 48,000,000%, thus far, in 2021, the expected reversion in SHIB over two years should be at least 99%.
A lack of competitive advantages and true differentiation spells trouble
The other big issue for Shiba Inu is that it lacks anything resembling a competitive advantage or true differentiation.
According to CoinMarketCap, there are more than 15,000 listed cryptocurrencies, with seemingly hundreds being added on a weekly basis. Even for digital currencies not experiencing coin inflation via mining, the entire crypto universe is being constantly diluted by new blockchain projects. Crypto tokens that don't stand out from the crowd rarely hang onto their gains.
The aforementioned Nano is one of a small number of projects where transactions are fee-free. That's a competitive advantage that allows it to stand out.
Meanwhile, Shiba Inu has no competitive edge or true differentiation. It's an ERC-20 token built on the Ethereum blockchain that's subject to the congestion that comes with being founded on one of the world's most-popular networks. Shiba Inu transaction fees are comparatively high and processing times lag virtually all major payment coins. Although the layer-2 Shibarium blockchain is waiting in the wings, it's unclear how much we'll really see transaction fees decline over time.
Real-world use data also confirms that Shiba Inu lacks true differentiation and long-term appeal. Though the use case for crypto is minimal for most coins, it's especially low for SHIB. With a nearly $20 billion market cap, you'd expect more than 376 merchants to accept SHIB. While I'm well aware that new coins have to start somewhere, Shiba Inu shouldn't be starting at a $20 billion market value if it has virtually no real-world utility.
With nothing to keep Shiba Inu in the forefront, other than social media hype, it has all the hallmarks of a digital currency that's going to implode over the coming years.