If you think the stock market has been a wealth-building machine since the pandemic lows of March 2020, take a closer look at the cryptocurrency space. While the widely followed S&P 500 has doubled in value in a little over 22 months, the aggregate value of all digital currencies has increased by well over 1,000%.
But even a 1,000% gain is a drop in the bucket compared to what meme-coin Shiba Inu (SHIB -6.89%) has delivered since the beginning of 2021.
Shiba Inu-themed coins were practically unstoppable in 2021. Image source: Getty Images.
Here's why Shiba Inu is on fire again
When midnight struck on Jan. 1, 2021, a single SHIB token could be purchased for a minuscule $0.000000000073. But by late October, Shiba Inu hit an all-time high of $0.00008841. In eliminating six zeroes, SHIB generated a jaw-dropping gain of more than 121,000,000% in less than 10 months.
As of the past couple of weeks, Shiba Inu is back to its old tricks. In the two weeks that have elapsed since the January cryptocurrency crash, SHIB has doubled from $0.000017 to about $0.000034, as of Feb. 7.
The primary catalyst behind Shiba Inu's resurgence is the expectation that layer-2 blockchain project Shibarium is going to be deployed sooner rather than later. It was revealed this week via a post on Medium that a public test run of the Shibarium network would be ready for launch "very soon." Though no specific date was given, Shibarium is currently being tested by developers behind the scenes.
Once launched, the expectation is that Shibarium will help dramatically reduce transaction fees. As a reminder, Shiba Inu is an ERC-20 token built on the Ethereum blockchain. Although Ethereum is a trusted network, it's prone to congestion and high transaction fees. In theory, Shibarium should lower fees to make SHIB a more competitive payment tool.
Most importantly, Unification Foundation, which has aided in the development of Shibarium, has previously detailed its efforts to optimize these low-cost transactions for gaming. It's no secret that Shiba Inu has intentions of developing a non-fungible token (NFT)-based game on its blockchain, and anything having to do with the metaverse and/or blockchain-based gaming is red-hot at the moment.
In short, this "operating update" has Shiba Inu's more than 1.1 million holders really excited.
Image source: Getty Images.
Keep those expectations on a short leash
In spite of this positive news, there are three core reasons I'm still not buying Shiba Inu. I'd also suggest you keep your distance, too.
1. Shiba Inu doesn't provide a competitive edge or differentiation
The leading reason to keep your distance from Shiba Inu since Day One has been and continues to be its lack of competitive advantages and true differentiation.
Shiba Inu is very good at generating buzz on social media. It was also one of the most searched digital currencies in 2021. But these aren't lasting advantages -- they're a sign of emotion or hype-based investing -- and emotion-based gains tend to be fleeting.
Broken down to its bare bones, Shiba Inu is nothing more than a payment coin. There are more than 17,000 cryptocurrencies listed on CoinMarketCap.com, and many of them can, in theory, be used to pay for goods and services at businesses that accept cryptocurrency.
Meanwhile, there are dozens, if not hundreds, of exciting blockchain-based projects designed to democratize financial solutions, as well as complete complex transactions involving files and data. Developers can also build decentralized applications on the back of smart contract-driven blockchain projects. These networks, such as Avalanche, Algorand, Solana, and Cardano, are what true innovation and differentiation look like. Shiba Inu is just another payment coin that will struggle to stand out from a use-case standpoint over the long run.
Image source: Getty Images.
2. It's not a particularly appealing payment coin
Secondly, but building on the previous point, Shiba Inu isn't even a particularly effective payment coin. Until Shibarium is launched, people who choose to use SHIB for transactions will deal with exceptionally high fees and a transaction completion time that averages about six minutes. The aforementioned innovative cryptocurrencies offer block finalities of a couple of seconds.
Shiba Inu has also struggled to garner a mainstream, real-world presence. For example, Shytoshi Kusama, Shiba Inu's lead developer, recently hyped up a big news event on Twitter, which happened to be Shiba Inu's partnership with fast-food restaurant Welly's in Italy. However, the restaurant in question that's been rebranded with the familiar Shiba Inu logo is a small outlet with just a handful of seats for diners. It's hardly the big win it was initially made out to be.
Furthermore, online business directory Cryptwerk notes that only 618 merchants worldwide accept SHIB as a form of payment. On one hand, this is up significantly from only a few dozen global merchants four months ago. On the other hand, there are more than 500 million entrepreneurs worldwide, and 618 mostly obscure businesses aren't going to move the needle.
A coin with virtually no real-world utility should not be worth $18 billion.
Image source: Getty Images.
3. Life-altering gains in payment coins are often met with equally painful reversions
History offers a compelling third reason not to buy Shiba Inu.
The cryptocurrency space has delivered a number of life-altering gains over short periods of time. I was able to locate a handful of payment coins or protocol tokens on payment networks that produced five- and six-digit percentage gains, often in less than a year. The problem is that each of these coins declined by 93% to 99% following their peaks.
The closest case study to Shiba Inu that I can find is privacy coin Verge. A privacy coin obfuscates the sender and recipient of a transaction to make it truly anonymous. In a year, Verge's XVG token catapulted by about 1,200,000%. It then went on to lose 99.6% of its value after hitting its all-time high.
Shiba Inu has risen as much as 121,000,000% in less than 10 months and has no true competitive edge or differentiation. Therefore, an equally large reversion is likely in the cards.
