Controversial cryptocurrency Shiba Inu (SHIB) broke records in 2021, delivering a return of 43,800,000% and making millionaires out of investors who had tipped in as little as $2.29 and held on for the entire ride.
But since reaching its lofty all-time high in October 2021, the token has collapsed in price by 71%. It leaves some latecomers deep underwater on their holdings, and new punters wondering whether it's a buying opportunity ahead of another historic rally -- especially since Shiba Inu is heading for the metaverse.
It's important to remember that cheap doesn't always equal a good value, and that rings true with Shiba Inu. Here's why I'm not buying the dip.
The metaverse may not be enough
The metaverse describes a series of virtual worlds that allow us to connect socially and for business purposes, on a whole new level. It's the next big thing in technology, and just about everyone wants a piece of its potential value.
Developers have recently created a world called the Shiberse, designed as a meeting place for the Shiba Inu community, which is set to feature over 100,000 virtual land plots in addition to non-fungible tokens (NFTs). Land transactions within the Shiberse will be facilitated using the Ethereum cryptocurrency, Ether.
Shiba Inu tokens can be spent to name plots of land with a burning mechanism that removes them from circulation, which theoretically increases the overall value of the remaining tokens.
It's an ambitious attempt to create some utility for Shiba Inu tokens, which have struggled in the real world -- just 654 obscure businesses accept them as payment. It's entirely possible the Shiberse does trigger a rise in value, especially since the entire metaverse industry could be worth $30 trillion over the next decade.
It's a rich pool of opportunity that's attracting the world's largest tech behemoths. Meta Platforms spent $10 billion on its metaverse initiative in 2021, and Nvidia has built a comprehensive creative platform for virtual-world developers called Omniverse.
For Shiba Inu the uncertainty lies in how the Shiberse stacks up against competing projects, and whether it can bring any unique attributes to the table that would drive adoption -- and since it has failed to do this in the real world, I'm betting it won't be much different in the metaverse.
Decentralized no more (potentially)
One of the major reasons investors are attracted to cryptocurrencies is their decentralized nature, meaning they can't be controlled by a government in the same way traditional money is. But in reality, this has allowed people in many countries to avoid paying taxes on their profits, and trade with few rules and regulations (or none at all).
It was therefore only a matter of time before governments began to crack down. In the U.S. investors must pay tax on their crypto gains already, but laws are being proposed to help track whether or not it's actually happening. Under one proposal, cryptocurrency brokers would be forced to report their clients' trading activity to the Internal Revenue Service each year, to ensure investors are complying with their tax obligations.
The Securities and Exchange Commission is toying with other considerations, like whether cryptocurrencies should be classified as securities. That would trigger a requirement for brokers and exchanges to comply with strict auditing and compliance standards, which might create a more expensive trading experience for investors.
With these initiatives likely to move forward eventually, investors will lose their anonymity and be dealt a more complex tax situation each year. It might even cause less demand for trading in speculative tokens like Shiba Inu.
Beware of the math
But in the end, the main reason it's not worth buying Shiba Inu is the lack of potential returns. Notwithstanding the above issues potentially keeping its price down, there are 589 trillion Shiba Inu tokens currently in circulation, making significant price increases extremely difficult. It's the primary reason for the metaverse burning mechanism mentioned earlier.
For example, if Shiba Inu soared to $1, it would have a market value of $589 trillion, which is more than all the recorded wealth in the world right now. That currently stands at $431 trillion, in case you're wondering.
And if you think Shiba Inu could repeat its 43,800,000% return from the current price of $0.000025, I have more bad news. It would send Shiba Inu to $10.95 per token, creating a total market valuation of $6.4 quadrillion. That's completely outside the realm of any reality -- physical or virtual.
Is there a chance Shiba Inu could revisit its all-time high of $0.000089? Sure, and it would represent a nice return of 256%. But there are plenty of stocks that could trounce that gain over the long term, and they also generate real sales, making them far more secure as an investment.