If you think Wall Street has had a good year, take a closer look at how well cryptocurrencies have performed. The aggregate value of all digital currencies has come close to tripling in 2021, and is up more than 14-fold since the March 2020 bottom.
While the "Big Two" -- Bitcoin and Ethereum -- account for 62% of the total digital currency market cap, neither coin has been creating more buzz or history this year than Shiba Inu (SHIB -2.99%).
Investors have had an insatiable appetite for Shiba Inu-themed coins this year. Image source: Getty Images.
Shiba Inu has been unstoppable in 2021
As someone who's been investing in stocks for more than 23 years, I can confidently say that single-year gains of 10,000% or more are extremely rare. But this hasn't held true for cryptocurrencies. This year alone there are a handful of digital tokens up by more than 12,000%. But even that's peanuts compared to what SHIB has done this year.
When the clock struck midnight on Jan. 1, investors had the opportunity to purchase Shiba Inu for a mere $0.000000000073 per token, according to CoinMarketCap.com. But as of the late evening on Dec. 14, these same coins were going for $0.00003357. In removing six zeroes from its token price, Shiba Inu has moonshot higher by 45,986,201%. For some added context, it would have taken an initial investment of just $2.18 to make someone a millionaire with this sort of year-to-date return.
How on Earth does any asset rise by nearly 46,000,000% in 11 months and some change?
To begin with, Shiba Inu has benefited from increased visibility in multiple respects. It's one of the most-searched cryptocurrencies in the U.S., and more crypto exchanges than ever are accepting SHIB for listing. It also hasn't hurt that the number of aggregate SHIB "hodlers" (a term that affably describes crypto token holders) recently surged above 1 million.
The launch of decentralized exchange ShibaSwap is playing a critical role, too. While ShibaSwap is improving liquidity, it's the ability to stake that's most important. Staking to earn passive income has incentivized investors to hang on to their SHIB. Just two months ago, Shiba Inu's median hold period was a laughably low six days, per crypto exchange Coinbase.
Investors are supportive of the ongoing coin burn, as well. After Ethereum co-founder Vitalik Buterin was gifted roughly half the 1 quadrillion coin supply by mysterious founder "Riyoshi," he sent approximately 410 trillion of these SHIB to a dead blockchain address. With these coins now out of circulation, it in theory makes each remaining token that much more valuable.
Lastly, the fear of missing out and future upgrades, including the expected launch of layer-2 blockchain Shibarium in 2022, has hodlers excited.
Image source: Getty Images.
I'm not touching SHIB, and you shouldn't, either
As for me, I wouldn't buy Shiba Inu with free money. And I certainly wouldn't suggest investors consider putting their own hard-earned money to work in this meme coin. Below are just some of the reasons the SHIB bubble is likely to implode over the coming 12 to 24 months, and why I'm not buying into the hype.
Let's start with the basics: utility. Most cryptocurrencies don't offer a lot in the way of real-world utility. Bitcoin is the most accepted digital coin by retailers, and it's become legal tender in El Salvador. But it's also had a multiyear head start over most of the crypto universe. What SHIB brings to the table is acceptance by a minuscule 387 global merchants, according to online business directory Cryptwerk. Keep in mind that more than 10% of these 387 retailers are crypto exchanges, which aren't really merchants.
While I've heard the idea (multiple times!) that SHIB has to start somewhere, it shouldn't have an $18 billion market value if it's struggling to gain acceptance by merchants.
To build on this point, Shiba Inu offers zero competitive advantages. Shiba Inu is an ERC-20 token built on the Ethereum blockchain that's exposed to the same high transaction fees and processing lag that plagues the popular Ethereum network. There's nothing about the transaction fees, processing times, or use case that allows SHIB to stand out in any way. And if it doesn't stand out, why would merchants jump at the chance to accept it?
Why mention competitive advantages, you ask? The simple answer is we're seeing hundreds of new blockchain projects emerge each week. While the vast majority of these projects won't gain any traction, there's undoubtedly innovation-based dilution working against Shiba Inu. In other words, some new coins and blockchain projects will be able to provide competitive advantages and differentiation where Shiba Inu cannot.
Image source: Getty Images.
Yet another reason I wouldn't buy into Shiba Inu is the historic precedence that's been set in the crypto space following life-altering gains. Recently, I reviewed how multiple payments coins fared after gaining between 24,000% and 462,000% in a 10-month to 30-month stretch. Once they peaked, they all went on to lose between 93% and 99% of their value.
To add, the only other coin I've followed that generated anywhere close to a gain of Shiba Inu's magnitude -- privacy coin Verge -- gained close to 1,200,000% in a year and shed 99.6% of its value shortly thereafter. Imagine what sort of reversion awaits SHIB after a peak year-to-date gain of 121,000,000%!
Finally, I'm not sold on the idea that blockchain technology is ready to go mainstream. Looking back on every next-big-thing investment over the past quarter of a century, investors have always overestimated how quickly it would be adopted. Some trends have gone through multiple boom-bust cycles because of it. Without broad-based blockchain adoption, I don't see any reason to be excited about the prospects of a social media-hyped token with no edge or true differentiating factors.
In my view, SHIB will be one of the worst-performing tokens over the next 12 to 24 months.
