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3 Reasons to Sell Shiba Inu

By Adria Cimino – Jan 6, 2022 at 6:00AM

Key Points

  • Community support pushed Shiba Inu to major gains last year.
  • But Shiba Inu’s limited utility and growth prospects may weigh on it in 2022 and beyond.
  • At the same time, rivals are growing rapidly.

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The most exciting chapters of this story may be over.

Shiba Inu (SHIB -0.60%) was one of last year's top meme tokens. Its community, the Shib Army, rallied behind the cryptocurrency. And many investors hopped on the bandwagon and bought Shiba Inu with the hope that gains would multiply. At first, they did. Shiba Inu soared as much as 109,000,000% to a high in October. Today, though, it's down about 60% from that point.

If you bought this hot crypto player, you may be wondering what to do at this point. Of course, there's always the possibility that Shiba Inu's gains will continue. But I'm not too optimistic. In fact, there are three good reasons to sell Shiba Inu right now. 

A Shiba Inu dog stands on grass and looks up, into the camera.

Image source: Getty Images.

1. It doesn't stand out from the crowd

Sure, every cryptocurrency investor has heard of Shiba Inu. The name, along with the image of a Shiba Inu dog, may stand out in many of our minds. But that doesn't mean Shiba Inu stands out as a cryptocurrency. And standing out is exactly what's needed for a cryptocurrency to last in this increasingly crowded market. Thousands of crypto players exist, after all.

Shiba Inu is built on the Ethereum blockchain. It isn't a blockchain itself, so its uses are limited. Right now, you can buy tokens, stake them for passive income, or use them at certain merchants as a payment method. And you can do that with a lot of other cryptocurrencies too. So there isn't a strong reason for investors to specifically buy Shiba Inu.

2. Limited potential for gains

Wait a minute... limited potential? you might say. We are talking about a crypto that skyrocketed last year. And it's still trading at a fraction of a dollar, so it could easily double or triple from here. Yes, this is a possibility.

But there's one major hurdle ahead: Reaching $1 looks nearly impossible. Here's why. Shiba Inu's circulating tokens total about 549 trillion. So if this crypto player reached $1, its market value would balloon out to $549 trillion. Today, the entire cryptocurrency market is valued at around $3 trillion. And the world's biggest cryptocurrency, Bitcoin, is worth about $877 billion. So it's clear that Shiba Inu can't reach $1 or more -- unless there's a drastic change to the token supply. This situation limits the potential for gains, and discourages long-term investors from getting in on Shiba Inu.

3. Growth of rivals

Here, I'm talking about the number of rivals and their development in the space. The biggest players by market value are blockchain networks. A few examples are Ethereum, Cardano, and Solana.

These cryptocurrencies and others are growing and defining the cryptocurrency market of the future. For instance, Ethereum is about to launch an update to increase its transaction speed. And Cardano is moving along through a five-stage development roadmap. These blockchain networks can host decentralized applications (dApps). Users can manage their investments, buy insurance, or invest in art through dApps. This kind of growth is leaving players with more limited uses -- like Shiba Inu -- behind.

Community support could push Shiba Inu above today's level. But I don't have any great long-term hopes for this crypto player, for the reasons above. And that's why I would favor selling today.

Adria Cimino owns Ethereum. The Motley Fool owns and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.

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