For more than 100 years, the stock market has been a moneymaking machine for the patient. Over the past century, it's averaged close to a 10% annual return.
However, select cryptocurrencies have made folks millionaires in the proverbial blink of an eye. Over just the past 23 months, the aggregate value of all digital currencies has rocketed from $141 billion to nearly $2 trillion! While the "Big Two," Bitcoin and Ethereum, take credit for the lion's share of this increase, it's meme coin Shiba Inu (SHIB 5.33%) that's delivered the most jaw-dropping gain.
Shiba Inu has come a long way since its debut in August 2020
On Aug. 1, 2020, mysterious founder "Riyoshi" introduced the world to Shiba Inu. With an initial circulating supply set at 1 quadrillion tokens, SHIB ended its first trading day at a microscopic $0.000000000972, according to data from CoinGecko.com.
But as of late evening, Feb. 16, these same SHIB tokens were changing hands for $0.00003124. Shiba Inu has had five zeroes eliminated after its decimal point since its first trading day, which works out to a gain of more than 3,200,000% in well under two years.
Put another way, if an investor had the wherewithal, stomach, and luck, to invest $100 into SHIB on Aug. 1, 2020, they'd now be sitting on an investment worth $3.21 million.
Interestingly, this investment has shrunk considerably from its peak, hit less than four months ago. When Shiba Inu hit its all-time high on Oct. 27, first-day buyers would have seen their $100 turn into nearly $9.1 million. But even after a 65% pullback, Shiba Inu has delivered hefty returns for first-day buyers.
Here's what sent Shiba Inu to the moon in 2021
If you're wondering how a cryptocurrency has delivered such enormous gains in such a short time frame, don't look at any one factor. Rather, understand that it was a confluence of catalysts that helped to push Shiba Inu to its historic increase.
Without question, increased visibility has been imperative to SHIB's ascent. A number of crypto exchanges have listed SHIB for trading, which has increased awareness of the token and underlying project(s). It's worth pointing out that popular online retail trading platform Robinhood Markets has yet to give in to demands from Shiba Inu investors to list SHIB for trading.
The launch of decentralized exchange ShibaSwap in July 2021 was equally important. ShibaSwap has helped improve liquidity for a previously illiquid coin, as well as encouraged staking, which has had a profoundly positive effect on median hold time for SHIB. A considerably longer holding period suggests investors have more faith in the long-term goals Shiba Inu's developers have laid out.
Another reason for this incredible performance is Shiba Inu's rapidly growing community. According to Etherscan, there are nearly 1.18 million unique wallets holding SHIB tokens. It was also one of the most-searched cryptocurrencies in the U.S. last year. It's no secret that emotion-based investing and conformation bias on social media can be powerful tools in the short-term to move digital currencies higher (or lower).
Crypto market dynamics have played a role, too. As I've previously pointed out, it's a lot tougher to bet against a lesser-known cryptocurrency than it is to short-sell a stock or buy/sell options. With the exception of Bitcoin, there simply aren't derivatives for skeptics to utilize. With crypto short-selling limited on lesser-known names like Shiba Inu, it creates something of a buy bias.
Lastly, there's been excitement about the future. Investors are stoked about layer-2 blockchain project Shibarium, which is designed to lower transaction fees, as well as Shiba Inu's metaverse ambitions. Shibarium is expected to launch this year, with blockchain-based gaming introduced in 2023.
SHIB's gains will likely prove fleeting
Although Shiba Inu's nearly 1.2 million investors have showed seemingly no aversion to the risk of a pullback, a multitude of factors suggest the bulk of its short-term gains could prove fleeting.
To begin with, history has been pretty clear that high-flying cryptocurrencies tend to deal with long periods of steep retracements after they hit their respective peaks. Between the beginning of 2021 and the Oct. 27 peak, Shiba Inu gained as much as 121,000,000%! Since then, as noted, SHIB has declined by 65%.
The closest comparison, in terms of short-term gain, is privacy coin Verge. A privacy coin is designed to obfuscate the sender and receiver of funds. A few years ago, Verge gained close to 1,200,000% in 12 months. But in the two years that followed, it went on to lose as much as 99.6% of its peak value. In fact, virtually all payment coins lost between 93% and 99%+ of their value in the 12 to 26 months following their respective peaks. That bodes poorly for Shiba Inu, assuming Oct. 27 was the peak.
Equally worrisome is the fact that Shiba Inu lacks anything resembling a competitive edge or true differentiation. Even though popularity was a differentiating factor for SHIB in 2021, this isn't a sustainable catalyst.
At its core, Shiba Inu is an ERC-20 token built on the Ethereum blockchain. There are hundreds, if not thousands, of cryptocurrencies that can be used to make payments (assuming merchants will accept crypto as a form of payment). Comparatively, only a small percentage of crypto blockchain projects offer a true edge in terms of network efficiency, scale, speed, and/or cost. Shiba Inu doesn't offer any advantages.
It's also not a particularly popular payment coin. Online business directory Cryptwerk notes that only 635 global merchants accept SHIB for payment. While this is up significantly from just a few dozen merchants in October, it's a far cry from being useful in the real-world. For context, there are over 32 million businesses in the U.S. alone.
Without any true differentiation, Shiba Inu's appears destined to push lower.