The thrill is gone for Shiba Inu (SHIB 0.87%) investors. At least, it might seem that way.
After skyrocketing enough to make heads spin throughout much of 2021, the meme coin began to sink in late October. Since then, Shiba Inu has plunged more than 60% from its peak.
Don't count the dog-inspired cryptocurrency out just yet, though. Here are three reasons Shiba Inu could bounce back in 2022 -- and one reason why it might not.
Image source: Getty Images.
1. Robinhood support
The laws of supply and demand work in determining prices for cryptocurrencies just as much as they do for any other product. There are currently more than 549 trillion Shiba Inu coins in circulation, so demand is going to be a much bigger factor in pricing for the cryptocurrency than supply. But there are reasons to think that demand for the meme coin could increase this year.
The possibility that Shiba Inu will be added to the Robinhood (HOOD 0.67%) trading platform should be high on the list of potential drivers of demand. There have been rumors that Robinhood is about to begin supporting Shiba Inu for a while now, with some flying as recently as this week.
Granted, Robinhood executives have indicated publicly that the company is in no hurry to expand its support of digital coins. However, that doesn't mean that new tokens won't be added to the platform this year. If that happens, I think there's a pretty good chance that Shiba Inu would be in the group. And if Shiba Inu is listed on Robinhood, you can bet that the demand will rise as millions of users gain access to trading the meme coin.
2. Shibarium on the way
While we can only speculate as to whether or not Robinhood will support Shiba Inu in the near future, there's another key catalyst for the token that is on the way. Shibarium is a layer-2 network that some anticipate will launch in the first quarter of this year.
Like many other top cryptocurrencies, Shiba Inu is built on the Ethereum (ETH 0.56%) blockchain. That's good in some ways, especially with Ethereum ranking as the top platform for smart contracts. However, Ethereum also has significant challenges, notably including high transaction fees.
A solution is on the way with the planned Ethereum 2.0 upgrade, which will move Ethereum to a proof-of-stake (PoS) protocol. This will slash its transaction fees and increase scalability.
But Shibarium will lower the transaction costs for Shiba Inu regardless of what happens with the Ethereum 2.0 upgrade. It seems quite possible that the launch of Shibarium could provide a huge boost to Shiba Inu's price.
3. A big metaverse opportunity
Another reason why Shiba Inu could rebound in a big way this year is the transition into gaming. Shiba Inu Games has brought Playside Studies on board to develop a multiplayer game for mobile use.
The game that's being developed by Playside isn't scheduled to launch until the first quarter of 2023. However, it's likely that anticipation could drive Shiba Inu's price higher, especially in the latter part of this year.
An even bigger story, though, is that the way could be paved for Shiba Inu to become a monster winner in the metaverse. The Playside-developed game will eventually be incorporated into Shibarium and become a Shiba Inu metaverse called the "Oshiverse."
Why the plunge could continue
Could Shiba Inu ever regain its previous highs with catalysts including Robinhood support, the launch of Shibarium, and excitement over its entrance into gaming and the metaverse? I think it's possible. But there's also one key reason why Shiba Inu's current plunge could continue.
The single biggest risk for Shiba Inu (and most cryptocurrencies) is the shift to a "risk-off" mentality among investors. In a risk-off environment, investors seek to put their money in more stable assets. We've seen this transition happen to some extent already in the last month or so. If investors become even more risk-averse, Shiba Inu and other cryptocurrencies will likely fall even more than they already have.
