If you had invested $2.29 in Shiba Inu (SHIB 2.30%) on Jan. 1, 2021, and held on, you would have been a millionaire by the end of the year. It's a return most investors never see in an entire lifetime.
That 43,800,000% gain made the controversial meme token the hottest of all the mainstream cryptocurrencies in 2021. It crushed its big brother Dogecoin (CRYPTO: DOGE), up 3,520% for the year, and Bitcoin, which returned just 62%.
But since hitting its all-time high of $0.000089 in October, Shiba Inu has lost over 69% of its value, trading at $0.000027 today. It might leave some investors wondering whether the steep decline sets the stage for a repeat of the astronomical gain from last year. So, should you buy the dip?
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Shiba Inu faces hurdles
While 2021 was a breakout year for cryptocurrency gains, it didn't improve mainstream adoption all that much. The measure of future success for a token like Shiba Inu is whether businesses are willing to accept it as payment, which should drive consumers to use it. But according to cryptocurrency directory Cryptwerk, just 641 mostly obscure merchants are willing to transact in the meme token.
A currency that climbs in value by millions of percentage points and then loses more than half its value -- all in the span of a year -- is no friend to a business that needs predictable cash flow. And that triggers a knock-on effect; if businesses won't take Shiba Inu, consumers have no reason to own it, except as a speculative bet.
Further, the crypto industry landscape is shifting. Its decentralized, unregulated nature that was a draw for so many investors is soon to evaporate as the U.S. government and its regulatory bodies seek to impose new rules. Under new legislation proposed for 2023, investors may be liable for taxes on cryptocurrency gains every time they sell, exchange, or spend their tokens. And brokers will be required to report such data to the Internal Revenue Service (IRS), lifting the precious veil of anonymity.
Like many asset classes in which speculation is prevalent, regulators are trying to minimize losses for unsuspecting retail investors. The Securities and Exchange Commission is looking at whether the majority of crypto assets should be classed as securities, which would force exchanges to fall within strict audit and compliance standards to prevent nefarious activity and market manipulation.
Shiba Inu's best returns might be behind it
Setting the above issues aside, investors hoping for a repeat of Shiba Inu's 2021 return of 43,800,000% are facing a mathematical challenge, to put it lightly. Based on the current price of $0.000027 per token and 589 trillion tokens in supply, Shiba Inu has a total market value of $15.6 billion right now.
If it were to gain 43,800,000% from here, Shiba Inu would trade at a price of $11.89 per token. Multiplying that by 589 trillion tokens in supply would result in a total market value of $7 quadrillion.
To put that mind-bending number into context, the sum of all the recorded wealth on the planet right now stands at about $431 trillion. So Shiba Inu's $7 quadrillion valuation would be worth 16 times more than all the assets held by every government, business, and individual in the entire world.
The absurdity of that idea probably needs no explanation.
For investors looking to add Shiba Inu to their portfolios right now, a more attainable price target might be the token's previous all-time high of $0.000089. It represents a potential 229% return from here, but even still, trailblazing meme token Dogecoin still hasn't reclaimed its previous highs, so it's no easy feat.
With all that said, it might be more beneficial to look at more traditional investments like stocks instead.
