Over the very long term, the stock market has been one of the world's greatest and most consistent wealth creators. But over the past couple of years, cryptocurrencies have run circles around every major stock market index.
As an example, the broad-based S&P 500 has surged higher by slightly more than 100% since hitting its pandemic low in March 2020. By comparison, the aggregate value of all digital currencies is up almost 1,300% over the same time frame, as of early morning, Jan. 20.
By itself, a nearly 1,300% gain in 22 months is impressive. But what meme coin Shiba Inu (SHIB 2.08%) has done in fewer than 13 months is simply jaw-dropping.
Shiba Inu-themed cryptocurrencies skyrocketed higher in 2021. Image source: Getty Images.
Shiba Inu has delivered life-altering gains in a very short time frame
According to data from CoinMarketCap.com, a SHIB token could have been purchased at midnight on Jan. 1, 2021 for $0.000000000073. But since the beginning of 2021, six zeroes following the decimal point have disappeared. As of the time of this writing, those same SHIB tokens were trading hands for about $0.0000275.
While it might be difficult to tell with so many zeroes in the way, this works out to a staggering gain of close to 37,700,000%! To put this into context, an investor with the luck, stomach, and wherewithal to put $2.66 into SHIB at midnight on Jan. 1, 2021 would be a millionaire as of this writing.
Shiba Inu's historic gains are the result of a multitude of factors and catalysts that have worked in its favor.
For instance, the trading dynamics of the cryptocurrency space create a buy bias that's simply not witnessed in the stock market. With stocks, it's relatively easy for short sellers (investors who want the price of a security/asset to decline) to place a trade. They can short sell shares of stock, or potentially use a derivatives trade, such as options contracts, to their advantage. Although short selling is possible on select cryptocurrency exchanges, it's considerably tougher to bet against any cryptocurrency not named Bitcoin. This inherent buy bias helped propel Shiba Inu from obscurity to, at one point, a top-10 market value among digital currencies.
Increased visibility and liquidity on multiple fronts was another significant lift for Shiba Inu throughout 2021. SHIB was listed on multiple crypto exchanges last year and received a boost from the launch of decentralized exchange ShibaSwap in July. ShibaSwap had the twofold benefit of improving liquidity for a previously illiquid coin, as well as allowing staking to take place. The ability to stake SHIB tokens to earn passive income has encouraged investors to hang on to their SHIB for longer periods of time.
Image source: Getty Images.
Shiba Inu claims another milestone
The world's hottest cryptocurrency has also soared on the heels of hitting psychological milestones.
For example, every time a zero was eliminated following SHIB's decimal point, it demonstrated how powerful momentum can be in the cryptocurrency space. After watching Bitcoin rally as much as 8,000,000,000% in a little over 11 years, crypto investors tend to be less worried about the possibility of price reversions than your typical stock investor.
The latest psychological milestone for Shiba Inu occurred within the past couple of weeks, when the aggregate number of unique SHIB holders surpassed 1.1 million, according to data from Etherscan. Based on the rate at which SHIB holders are increasing (about 25,000 new holders every 14 days), Shiba Inu looks to be roughly a month away from hitting the next milestone: 1.2 million unique holders.
Growing Shiba Inu's community is important for a variety of reasons. To begin with, a larger community helps to improve liquidity, and will be counted on to increase merchant adoption. If a retailer understands that more than 1.1 million people own a stake in SHIB, they may be more willing to accept it as a form of payment.
Additionally, community plays a big role in fueling interest in Shiba Inu on social media platforms like Twitter. Simply knowing that there are in excess of 1.1 million people betting on Shiba Inu to rise in value over time can be powerful in a market where, as noted, short selling remains difficult.
A larger community also validates the work and effort being put in by Shiba Inu's developers. These developers intend to roll out a layer-2 blockchain upgrade known as a Shibarium this year, as well as continue their work on a blockchain-based gaming ecosystem known as the Oshiverse.
Image source: Getty Images.
Milestones aside, Shiba Inu remains an extremely risky investment
While the milestones have been bountiful for Shiba Inu since the beginning of 2021, the risks associated with SHIB have also been plainly visible. Even with more than 1.1 million holders in its sails, a number of factors suggest Shiba Inu is in for a rough 2022.
The single biggest concern with the world's hottest cryptocurrency, which I've previously pointed out, is its lack of a competitive edge or true differentiation. Shiba Inu is an ERC-20 token built on the Ethereum blockchain. For the time being, this means it's subject to the same processing lag times and ultra-high transaction fees that plague the Ethereum network. Shibarium may help to lower transaction fees for SHIB, but it still won't help this payment coin stand out in a crowded space.
Shiba Inu's real-world utility leaves a lot to be desired, too. To be fair, the real-world usage of digital currencies is low across the board. Even Bitcoin's utility is somewhat questionable, with El Salvador being the only country recognizing it as legal tender. However, SHIB being accepted as payment by only 600 global merchants, according to online business directory Cyrptwerk, is an exceptionally small number for a digital currency with a market value north of $15 billion.
History hasn't been kind to payment coins that deliver life-altering gains in very short time frames, either. When I looked back at the performance of payment coins and protocol tokens on payment networks that delivered five- and six-digit percentage gains in short periods of time, I found that most were pummeled in the two years following their peak. In virtually all instances, these high-flying and unproven digital currencies lost 93% to 99% of their value within 26 months.
While there's no questioning Shiba Inu's online popularity, the meat and potatoes of what'll keep this project relevant years down the line is still very much in question.
