For well over a century, Wall Street is where many fortunes have been made. But in recent years, it's cryptocurrencies that have run absolute circles around the stock market.
For example, between the March 2020 pandemic low and the end of 2021, the widely followed S&P 500 slightly more than doubled in value. By comparison, the total value of all digital currencies increased by over 1,400%!
While this nominal increase in the aggregate value of cryptocurrencies can be attributed to gains in the Big Two, Bitcoin and Ethereum, it's meme-coin Shiba Inu (SHIB -1.28%) that's raised eyebrows and dropped jaws last year.
Sizing up Shiba Inu's historic year
When 2021 began, the relatively obscure SHIB token was changing hands at a microscopic $0.000000000073. But when the curtain closed, these same tokens were being exchanged on multiple crypto exchanges for about $0.000034.
In the process of erasing six zeroes after its decimal point, Shiba Inu delivered a historic gain of approximately 46,000,000%. Those who had the stomach, luck, and wherewithal to stick with SHIB throughout the year likely became millionaires from pocket-change-equivalent investments.
There wasn't a single factor that can be pinpointed as the sole reason for SHIB's ascent. Rather, it was a confluence of factors that led to this mind-blowing gain.
For instance, Shiba Inu's visibility improved on all fronts in 2021. It was listed on numerous crypto exchanges and saw its liquidity dramatically improve with the launch of decentralized-exchange ShibaSwap in July. ShibaSwap, which allows SHIB holders to stake their coins to earn passive income, has been especially helpful in encouraging investors to hang onto their tokens for extended periods of time.
On a percentage basis, Shiba Inu benefited from a big jump in utility. In mid-October, when the world's hottest cryptocurrency was nearing its all-time high, SHIB was being accepted by a couple of dozen merchants worldwide. But according to online business-directory Cryptwerk, over 600 merchants globally now accept SHIB as a form payment.
The unique dynamics of the cryptocurrency space also encouraged Shiba Inu's mammoth rise. Whereas it's relatively easy for pessimists to bet against a publicly traded company by short-selling shares of stock or utilizing derivatives, such as an options contract, these same channels may not exist in the crypto space. Even with some exchanges allowing users to short-sell digital currencies, there exists an inherent buy bias in a number of second-level cryptocurrencies (i.e., those not named Bitcoin and Ethereum).
Shiba Inu has a trio of notable catalysts in 2022
In 2022, Shiba Inu's catalysts should remain equally diverse. Instead of looking toward one single event, the following three catalysts stand out as most capable of moving its token price.
First, there's the expected launch of Shibarium, a layer-2 blockchain project. Currently, SHIB is nothing more than an ERC-20 token built on the Ethereum blockchain. While Ethereum is a popular network and a common destination for decentralized-application developers, this popularity comes at a price -- namely, Ethereum's transaction fees are sky-high and it's slow to complete transactions.
Shibarium will be layered atop the existing blockchain to dramatically reduce, or perhaps even eliminate, transaction fees associated with SHIB. Significantly reducing these prohibitively high transaction costs could make it more attractive for retail merchants worldwide.
Second, online stock and crypto investing-platform Robinhood Markets (HOOD 2.18%) could make enthusiasts' dreams come true or crush them. That's because there's a growing outcry from many of Shiba Inu's more than 1.1 million unique holders for Robinhood to list SHIB for trading on its platform. Robinhood had 17.3 million monthly active users, as of December 2021. Listing SHIB on Robinhood could quickly grow its holder base.
For the time being, it doesn't look as if Robinhood is going to budge. CEO Vlad Tenev has expressed concern about adding potentially unregistered securities to the platform, which could draw ire from the Securities and Exchange Commission (SEC). Perhaps once the SEC wraps up its case against Ripple, the company behind the XRP cryptocurrency, Robinhood's likelihood of listing SHIB will become clearer.
The third big catalyst for Shiba Inu in 2022 is the ongoing development of the Oshiverse. This is the term developers are using to describe the non-fungible token (NFT)-based gaming platform that'll be built on blockchain. Keep in mind that developers can't launch gaming until after Shibarium is in place. This is to ensure that NFT marketplace transactions aren't cost-prohibitive to users.
This year, investors will primarily be looking for updates on game-development progress, as well as monitoring gaming and metaverse growth throughout the crypto space.
Catalysts aside, SHIB remains a very dangerous investment
While there are plenty of reasons the world's hottest cryptocurrency could find a spark in 2022, there's an equally long list of reasons to keep your distance.
Though I've said it dozens of times before, it bears repeating, especially in the cryptocurrency space where social-media hype can be a strong driving force: Cryptocurrencies must possess competitive advantages and/or differentiation to thrive for long periods of time.
Shiba Inu offers neither. With more than 17,000 cryptocurrencies for investors to choose from, not having an edge will make it virtually impossible for Shiba Inu to stay relevant.
Additionally, Shiba Inu has a poor use case. Although the number of merchants accepting SHIB has grown substantially on a percentage basis since mid-October, the 610 merchants currently accepting it as payment is a staggeringly small figure for a digital currency with a nearly $12 billion market value. While I understand the argument that Shiba Inu has to start somewhere, fledgling payment coins that have yet to demonstrate any true utility shouldn't be commanding market valuations near $12 billion.
Furthermore, life-altering gains over the short term for payment coins are almost always met with equally large reversions. Keeping in mind that most five- and six-digit percentage gains in very short time frames resulted in payment coins retracing 93% to 99% over the subsequent 12 to 26 months, I can only imagine Shiba Inu's retracement will be huge following a peak intra-year gain of 121,000,000% last year.