If you think stock market returns have been impressive this year, take a closer look at cryptocurrencies, which have truly been the gift that keeps on giving. The aggregate value of all digital currencies was up by 196% this year, through the late evening of Dec. 21, and more than 1,500% since the crypto market hit its pandemic bottom in March 2020.
While many of the usual suspects have been responsible for this nominal increase in market value, it's meme coin Shiba Inu (SHIB 1.71%) that's captivated crypto investors.
Image source: Getty Images.
Shiba Inu soared in 2021, but it could plummet next year
According to data from CoinMarketCap.com, investors had the opportunity to pile into SHIB for $0.000000000073 per token at midnight on Jan. 1. Over the course of 11-plus months, six zeroes have been eliminated. Based on a per-token price of $0.00003334 at the time of this writing, the Shiba Inu coin has delivered a year-to-date return of more than 45,000,000%! Put another way, a little over a $2 investment would have made people millionaires, based on a 45,000,000% return.
There is an abundance of reasons retail investors have rallied around Shiba Inu this year. These include SHIB being listed on a growing number of exchanges, the launch of decentralized exchange ShibaSwap, SHIB landing its first major merchants, and -- without question -- the fear of missing out (FOMO). It's also a lot tougher to short-sell in the cryptocurrency space, relative to the stock market, which has created a natural buy bias in the short term for Shiba Inu.
Though there's no denying these gains in 2021 have been historic, they're also almost certainly fleeting. That's because Shiba Inu is lacking in all the important categories crypto investors should care about. It offers no competitive advantage over other payment coins, has demonstrated no true differentiation (social media pumping isn't sustainable differentiation), and has extremely limited utility, with fewer than 390 merchants accepting it as payment.
What's more, historic precedents have clearly shown that life-altering gains in the crypto space are always followed by epic reversions. With a gain of more than 45,000,000% in less than a year, it's only logical that a reversion of 99% follow.
Image source: Getty Images.
These digital currencies can run circles around SHIB in 2022
While there are reasons to believe Shiba Inu will be one of the worst-performing cryptocurrencies next year, the following trio of digital currencies all have the potential to run circles around SHIB.
Avalanche
Even though Avalanche (AVAX 2.18%) doesn't come close to Shiba Inu's percentage gain this year, it has left SHIB in the dust when it comes to market value. In 2022, I'd expect that gap to widen significantly.
What makes Avalanche such an intriguing smart-contract based blockchain network is its speed and compatibility. Smart contracts are protocols that help to verify, facilitate, and enforce a contract between two parties.
In terms of the former, Avalanche is an exceptionally fast network. Its main project page notes that it's capable of more than 4,500 transactions per second (TPS), with a transactional finality of less than two seconds. This is just a fancy way of saying that the transfer of money, files, or data is being completed in under two seconds. Comparatively, the Big Two, Bitcoin (BTC 2.08%) and Ethereum (ETH 0.96%), are processing at just 7 TPS and 13 TPS, respectively, and take approximately 60 minutes (for Bitcoin) and 6 minutes (Ethereum) to complete transactions. As a reminder, Shiba Inu is an ERC-20 token built on the Ethereum blockchain, meaning it's subject to the low TPS and lag time that occasionally plague the Ethereum network.
However, it's the compatibility of Avalanche's blockchain network that's even more of a lure for investors. You see, the Ethereum Virtual Machine is already operating on Avalanche's blockchain. This means decentralized application (dApp) developers on Ethereum's network could easily move their projects to Avalanche's network to pay lower transaction fees and enjoy faster execution and scalability.
A physical representation of a Stellar Lumen coin. Image source: Getty Images.
Stellar
Recently, anything having to do with dApp development and/or the metaverse has been unstoppable in the crypto space. But don't overlook the potential of financially focused, blockchain-based payment networks. A good example of one that can run circles around SHIB in 2022 is Stellar (XLM 3.37%).
Using existing infrastructure, it can take up to a week for cross-border payments to validate and settle. That's not very efficient, albeit it's something consumers and businesses have been accustomed to for decades. With Stellar, fiat currency is converted to the network's protocol token (XLM, known as a Lumen), sent to its destination, and converted back to the fiat currency of choice. This entire process takes just a few seconds, even across borders.
It's also an incredibly inexpensive way to transfer money. The average transaction cost on the Stellar network is just 0.00001 XLM. Based on its closing price on Dec. 21, it would take in the neighborhood of 370,000 transactions before a user would even rack up $1 in fees. Compare that to the wire fee you'll pay at your local bank and you'll see what a bargain Stellar's blockchain network can be.
Something else worth noting is that Stellar has real-world partnerships. The Stellar Development Foundation is collaborating with Visa and the digital financial services provider Tala to bring financially focused blockchain solutions to emerging-market countries. It has also worked with IBM and a dozen banks in the South Pacific region to test blockchain-based cross-border payments.
Image source: Getty Images.
Qtum
Now, if investors want something truly off the radar that can run circles around Shiba Inu in 2022, consider Qtum (QTUM 1.71%), which is pronounced as "Quantum," for those curious.
Qtum is narrowly hanging on to its spot in the top 100 cryptocurrencies by market cap. But it's a very intriguing blockchain project that offers clear competitive advantages. And when there are nearly 16,000 listed digital currencies on CoinMarketCap.com, having a competitive edge is a must to stand out.
What makes Qtum so interesting is that it pulls the best aspects of Bitcoin and Ethereum into one blockchain project. It leans on the security of Bitcoin's UTXO model and combines it with the aforementioned Ethereum Virtual Machine. The end result is a highly secure blockchain that can support smart contracts, and therefore should have no trouble attracting dApp developers.
The Qtum blockchain also deploys what it calls the Account Abstraction Layer (AAL). Without getting overly technical, the AAL allows Qtum to regularly introduce smart-contract upgrades that'll function with Bitcoin's UTXO model. In other words, it'll remain backwards compatible, no matter how complicated smart contracts become on the blockchain.
With plenty of partnership potential, Qtum should be able to handily outperform Shiba Inu next year.
