For the past few years, cryptocurrencies have run circles around the stock market. Although not every cryptocurrency has fared well, the aggregate value of digital currencies has skyrocketed from $141 billion in March 2020 to $2 trillion, as of Feb. 8, 2022.

Although the "Big Two" -- Bitcoin and Ethereum -- garner a lot of credit for this nominal increase in market value, it's up-and-comers like Shiba Inu (SHIB 21.22%) that've been turning heads and raising eyebrows.

Last year, Shiba Inu delivered a peak gain of 121,000,000% in less than 10 months (not a typo!), and ultimately ended the year higher by around 46,000,000%. On the heels of such a historic gain, it's become quite the polarizing cryptocurrency.

With SHIB tokens sitting at $0.000032, as of the time of this writing, the big question is whether they'll triple from here and hit $0.0001, or lose around two-thirds of their value and descend to $0.00001.

A Shiba Inu-breed dog lying on its side and looking up.

Shiba Inu-inspired coins were red-hot in 2021. Image source: Getty Images.

The case for Shiba Inu to eat up another zero

In order for the world's hottest cryptocurrency to keep its streak going of eating up zeroes after its decimal point, a number of catalysts are going to have to go its way.

To begin with, there's growing excitement over the public launch of layer-two blockchain project Shibarium. Shiba Inu is an ERC-20 token built on the Ethereum blockchain. While Ethereum has a trusted network, its popularity often leads to slow processing times and very high transaction fees. Shibarium is developers' solution to resolving these ultra-high transaction fees. A recent post in Medium notes that Shibarium is undergoing its second private test and would soon be ready for a public test run.

The success of Shibarium is highly dependent on the next major catalyst: Non-fungible token (NFT)-based gaming. Shiba Inu's developers have made no secret of their plans to develop a game on their native blockchain. But before they can launch the "Oshiverse," as they're calling it, Shibarium needs to be in place. This is to ensure that NFT-based transactions aren't cost-prohibitive. The current expectation is that gaming will launch sometime in 2023.

Visibility continues to be another tangible driver for SHIB. While listing on new crypto exchanges has helped, it's still missing a whale in the industry: Robinhood Markets (HOOD 1.65%). Putting aside the PR mess Robinhood got itself into in 2021, the online platform still ended the year with 17.3 million monthly active users. That's a lot of people who could potentially put their money to work in SHIB, if it were listed on Robinhood -- big if!

Person holding glowing lock surrounded by latticework.

Image source: Getty Images.

Why Shiba Inu could fall back to $0.00001

However, it could be just as likely that Shiba Inu continues to fade from its Oct. 27 all-time high and retraces all the way back to $0.00001, which would represent a loss of 89% from its peak.

Easily the biggest downside catalyst with SHIB, and most cryptocurrencies for that matter, is a shift in investor emotions. Shiba Inu rode high in 2021 on the back of social media hype and a growing community, which now sits at more than 1.1 million holders. But emotion-based investing tends to be fleeting, as we've witnessed countless times in the crypto space and stock market.

Perhaps a bigger concern is Shiba Inu's lack of real-world utility and blockchain-based differentiation. Developers are attempting to help the project stand out with Shibarium and NFT-based gaming on blockchain. But this is far from the only project with games built on blockchain. As of right now, Shiba Inu is simply a payment coin -- and there's nothing special or differentiated about a digital token that's used to pay for goods and services.

Skeptics may also harp on Shiba Inu's lack of a merchant base. To be fair, the number of merchants accepting SHIB has catapulted on a percentage basis since October. But when I say "catapult," the end number is only 618 global merchants. Of these "retailers," more than 40 are spot/crypto exchanges. The point is that SHIB has extremely limited use outside of cryptocurrency exchanges.

Silver dice saying Buy and Sell rolling across digital screen displaying charts.

Image source: Getty Images.

Here's where Shiba Inu is likely to head next

Now that we've had a look at both sides of the coin, let's get back to the key question at hand: Is $0.0001 or $0.00001 the likeliest destination for SHIB tokens?

While there's certainly a lot more going on with Shiba Inu from a development perspective than at this same time last year, the tea leaves suggest it's far likelier SHIB will continue to retrace.

For instance, even though history doesn't exactly repeat, it does have a tendency to rhyme. Multiple payment coins and payment network protocol tokens have returned 10,000% or more in short timeframes. But in many of these cases, the payment coins in question went on to shed 93% to 99% of their value in the 12 to 26 months following their peak. With Shiba Inu gaining as much as 121,000,000% in 10 months, history would suggest a large reversion is imminent. Keep in mind that SHIB tokens have already declined by 64% since hitting their all-time high 3.5 months ago.

One of the world's largest cryptocurrencies should also offer something that's game-changing. Though many of the projects surrounding Shiba Inu in market value do offer the ability to change how information or payments move from Point A to Point B, Shiba Inu remains nothing more than a payment coin backed by social media hype. Without this game-changing quality, it's going to be incredibly difficult for SHIB to reach a market value of $55 billion (i.e., $0.0001).