In 2021, Shiba Inu (SHIB -0.34%) and Dogecoin (DOGE -0.84%) exploded onto the cryptocurrency scene. Using the Japanese hunting dog, the Shiba Inu, as their mascots, both cryptocurrencies seemingly came out of nowhere and went on a run that turned some early investors into billionaires. The price of Shiba Inu has climbed more than 50 million percent this year (yes, that's not a typo), while the price of Dogecoin is up more than 3,300%. Which one is the better buy? Let's take a look.

Shiba Inu: The dog tokens look similar, but the differences are key

Keith Noonan (Shiba Inu)In some respects, there are a lot of similarities between Shiba Inu and Dogecoin. Both cryptocurrencies currently function solely as currencies and speculative investment vehicles, which means they aren't integrated with a blockchain service network in the same way as Ethereum, Solana, and Cardano's respective tokens.

Both Shiba Inu and Dogecoin were started partially as spoofs on the cryptocurrency craze, and both went on to post fantastic gains thanks to meme energy and speculative investment frenzy. And, of course, both tokens have the Shiba Inu dog for a mascot. 

A Shiba Inu dog lying on a bed.

Image source: Getty Images.

However, there are some notable differentiating points as well. While Dogecoin is modeled after Bitcoin, Shiba Inu is an ERC-20 token built on the Ethereum blockchain. Shiba Inu's Ethereum connection means that the token could eventually have smart contract functionality implemented down the line.

The two cryptocurrencies' respective approaches to mining and coin supply present additional points of distinction. Rather than allowing new tokens to be mined like Dogecoin, Shiba Inu is actively deflationary, with tokens regularly being burned and taken out of circulation. While SHIB has a greater overall token count, the burning dynamic could help the cryptocurrency's value relative to DOGE.

Dogecoin currently has a market capitalization of about $23.3 billion, while Shiba Inu has a market cap of roughly $18.3 billion. However, while Dogecoin has the larger market cap, Shiba Inu's meme energy still seems hotter. Google Trends analysis shows that SHIB is still generating more search interest, and general popularity could be a deciding factor in which token performs better in the future.

Shiba Inu also appears to still be at an earlier adoption stage, with the token not yet added to Robinhood Markets' trading platform. If SHIB is added to Robinhood next year, that could create a significant positive pricing catalyst for the token. SHIB seems to have more momentum as a potential metaverse token than DOGE.

With its smaller market cap, deflationary characteristics, and other advantages, I think Shiba Inu still has more room for explosive growth than DOGE. 

Dogecoin: Backed by a heavyweight

Bram Berkowitz: I have never really seen a super intriguing investment thesis for owning Dogecoin or Shiba Inu. I invested a very small amount in Dogecoin at the beginning of the rally but have since sold the cryptocurrency, largely because there is not much that differentiates the token from others aside from its Shiba Inu mascot and the humorous origination premise. But if it's up against Shiba Inu, I do see several advantages.

For one, it is estimated that more than 65% of Dogecoin tokens are held in about 98 digital wallets. About five wallets control 40% of the total tokens. This could make Dogecoin very volatile at some point, but it is in a slightly better situation than Shiba Inu, where more than 53% of the tokens outstanding are held in just four crypto wallets. 

The other main reason I'd choose Dogecoin is that Tesla founder Elon Musk backs it. Musk owns just three cryptocurrencies: Bitcoin, Ethereum, and Dogecoin. Musk is a business genius, having founded PayPal, SpaceX, and other companies. "Lots of people I talked to on the production lines at Tesla or building rockets at SpaceX own Doge," Musk wrote on Twitter. "They aren't financial experts or Silicon Valley technologists. That's why I decided to support Doge -- it felt like the people's crypto."

Not only can Musk's tweets about Dogecoin get the price moving, but Musk also seems genuinely interested in improving the network, having supported and spoken of the need for upgrades. Musk also recently said that Tesla would allow people to use Dogecoin to pay for some merchandise. This isn't exactly a fundamental source of support for Dogecoin, but Musk is a game-changing figure, and his tweets about the cryptocurrency have resulted in big spikes on several occasions.

Which is the better buy?

Ultimately, both Shiba Inu and Dogecoin are speculative plays, so we only recommend devoting a very small portion of your portfolio to either and being prepared for volatility, as well as the potential to lose everything. Shiba Inu appears to have more momentum right now and potentially more catalysts ahead, but Dogecoin might be better for those who think that Musk can provide at least some stability and long-term relevance.