The crypto market has boomed over the past year, but no cryptocurrency has been on a wilder ride than Shiba Inu (SHIB -0.05%). Its price is up more than 364,008% over the past year, even despite two substantial downturns.

Although Shiba Inu has taken a turn for the worse since its all-time high in late October, it's been making a comeback recently -- surging nearly 44% over the past two weeks.

Although it can be tempting to jump on the Shiba Inu bandwagon, it's still a risky investment. While there's one reason you may consider buying now, there are two reasons to avoid it.

Shiba Inu dog against a yellow background.

Image source: Getty Images.

Why Shiba Inu could be the right investment for you

1. You're willing to take a gamble

Shiba Inu may be risky, but it's hard to argue with its growth. The crypto's developers are also making an effort to give Shiba Inu more real-world utility, which could help it gain more traction.

For example, Shiba Inu will be dipping its toes into the metaverse with its new project, Shiberse. While little is known about the upcoming project, the metaverse is one of the trendiest topics in investing right now. Expanding into the metaverse could help Shiba Inu stay on the radar.

In addition, developers are working on Shibarium, a blockchain update that could result in lower transaction fees across the Shiba ecosystem. While the upgrade isn't expected to go live until later this year, it could help make Shiba Inu a more affordable and accessible cryptocurrency.

Of course, these updates and expansions are no guarantee that Shiba Inu will continue to grow. But if you have cash to spare and are willing to take on more risk for the chance at higher earnings, Shiba Inu could be the investment for you.

Why it may be best to avoid Shiba Inu right now

1. It could struggle to keep up with the competition

While Shiba Inu has been making more strides toward becoming a stronger cryptocurrency, it still struggles when stacked up against its competitors.

Shiba Inu is, at its core, a payment coin. It's used as a form of exchange, and its blockchain doesn't allow decentralized applications (dApps) like non-fungible token (NFT) marketplaces or decentralized finance (DeFi) projects.

This makes it tough to compete with larger networks like Ethereum (ETH 0.60%), Solana, and Cardano -- all of which allow dApps. Considering that NFTs and DeFi are some of the fastest-growing markets within the crypto space, this puts Shiba Inu at a disadvantage.

Because its primary use is as a payment coin, its biggest competitor is Bitcoin (BTC 0.44%). While Shiba Inu has gained a substantial amount of market share over the past year, it's nowhere near Bitcoin. Bitcoin has a market cap of over $800 billion, while Shiba Inu currently sits at around $16 billion.

If Shiba Inu is going to become a real competitor in the crypto market, it will need more utility. Although it's taking steps in the right direction, it may not be enough to keep up with stronger cryptocurrencies.

2. Its growth is based mostly on hype

Perhaps the biggest risk of investing in Shiba Inu is that it's been heavily hyped in the past. It was originally created as a parody of Dogecoin, and it's only started developing real-world uses after its tremendous growth.

This is a stark contrast to cryptos like Bitcoin and Ethereum, which were created to solve specific problems. Shiba Inu rose to fame during the crypto craze last year, and its meteoric growth was due mostly to retail investors buying in droves to increase the price, only to sell shortly after and make a quick profit.

Another concern surrounding Shiba Inu is the fact that just 10 accounts control nearly 65% of all coins in existence. And more than 81% of all coins are owned by just 100 accounts. If any of these large accounts sell their coins, it could lead to massive waves of volatility.

While Shiba Inu has its advantages, it's not right for everyone. It's one of the riskier cryptocurrencies out there, so be sure you know what you're getting into if you choose to buy. With a little research and preparation, you can determine whether Shiba Inu is a good fit for you.