If you believe Wall Street has delivered impressive gains since the pandemic bottom of March 2020, take a closer look at the cryptocurrency space. Whereas the broad-based S&P 500 has effectively doubled in value from its March 2020 low, the aggregate value of all digital currencies has skyrocketed nearly $1.7 trillion, or more than 1,200%, over the same period.
As you might imagine, crypto's two giants, Bitcoin and Ethereum (ETH 0.33%), have played a big role in this nominal increase in digital currency market value. But don't overlook meme coin Shiba Inu (SHIB -1.16%), whose historic gains have been responsible for luring new investors into the crypto arena.
Shiba Inu-themed coins were red-hot in 2021. Image source: Getty Images.
Shiba Inu's historic returns in 2021 may never be repeated
At the stroke of midnight on Jan. 1, 2021, investors had the opportunity to purchase SHIB tokens for a microscopic $0.000000000073. Less than 10 months later, these same coins would hit an intra-day high on Oct. 27 of $0.00008841. It might be difficult to do the math with so many zeroes after the decimal point, but in under 10 months Shiba Inu rose in value by a staggering 121,000,000%! Even after quite the pullback from its all-time high, SHIB tokens ended 2021 higher by approximately 46,000,000%. It's possible we'll never witness a single-year gain of this magnitude again.
Shiba Inu's historic gains are primarily the result of unique cryptocurrency trading dynamics and substantially improved visibility. In terms of the former, it's sometimes difficult for skeptics to bet against cryptocurrencies not named Bitcoin. Some crypto exchanges don't allow short selling, and no derivatives exist (e.g., futures contracts or options) to bet against lesser-known coins like SHIB. This created a natural buy bias for Shiba Inu in 2021.
Meanwhile, Shiba Inu also benefited from numerous new crypto exchanges accepting its coin for listing, as well as the launch of decentralized exchange ShibaSwap in July. ShibaSwap boosted liquidity and introduced staking, which allows SHIB holders to earn passive income. Since SHIB's October moonshot, the median holding period for tokens on Coinbase Global, the top crypto exchange, has increased from just six days to 111 days.
With such a historic performance in the books for 2021, it has SHIB holders wondering if the oft-touted $0.01 price target could be hit as soon as 2023.
Image source: Getty Images.
A penny for Shiba Inu holders' thoughts
For Shiba Inu to hit $0.01, its token would need to increase in value by nearly 45,000% from where it is at the time of this writing ($0.0000222) on April 11, 2022. That might sound like an impossible figure, but holders are counting on a number of near-term catalysts to send SHIB to the moon, once again.
The most front-and-center catalyst is the expected launch of layer-2 blockchain project Shibarium around the midpoint of this year. Shibarium is an in-house developed blockchain solution that's specifically designed to lower transaction fees. According to a post on Medium earlier this year, Shibarium was being tested on private networks.
Since Shiba Inu is an ERC-20 token built on the Ethereum blockchain, it's currently exposed to the same processing lags and high transaction fees that occasionally plague the Ethereum network. Lowering these transaction fees is critical to supporting increased SHIB use, as well as promoting additional ecosystem features.
What do I mean by "ecosystem features?" For example, lower transaction fees are necessary before Shiba Inu's development team can launch non-fungible token (NFT)-based gaming. Buying and selling NFTs in marketplaces can't be done cost-effectively without Shibarium significantly lowering transaction fees.
Additionally, developers announced plans to sell digital plots of land, known as Shiba Lands, in a ploy to enter the metaverse -- i.e., the next iteration of the internet, which allows connected users to interact with other users and their environment in 3D virtual worlds. These "Shiba Lands" will be stored as NFTs.
Lastly, SHIB holders are counting on coin burn to significantly lift the token price. Just as a share buyback in the stock market (in theory) makes each remaining share that much scarcer and more valuable, sending SHIB tokens to dead blockchain addresses can reduce the circulating supply of coins and make each remaining token more valuable.
Image source: Getty Images.
A trip to the doghouse is more likely than $0.01 by 2023
While there's no question that Shiba Inu has a lot more going on now than it ever did in its record-setting 2021, the chance of SHIB reaching $0.01 in 2023 is virtually zero for a variety of reasons.
For instance, even though Shibarium is designed to lower transaction fees, it's unlikely to change the fact that Shiba Inu is ultimately nothing more than a payment coin built on the Ethereum network. There are thousands of digital currencies that can act as payment coins, and there's nothing particularly special or unique with regard to what Shiba Inu is offering users on the payment front. Without anything resembling a competitive edge or lasting differentiation, Shiba Inu is probably going to struggle to stand out in the rapidly growing crypto arena.
It's also not clear how successful Shiba Inu will be with its NFT gaming and metaverse ambitions. Not only does the launch of NFT-based gaming look to be about a year away -- thusly allowing competition to pull further ahead -- but interest in NFTs has fallen off significantly in recent months. Based on data from Google Trends, interest in the search term "NFT" declined by 68% between the beginning of 2022 and the first week of March.
Another reason to be concerned is the likelihood that coin burn will turn out to be minimal. Shiba Inu benefited nicely from Ethereum founder Vitaly Buterin burning more than 410 trillion coins last year. But with 549 trillion coins still outstanding and no burn events coming even remotely close to what Buterin did last year, coin burn is unlikely to have much, if any, impact on SHIB moving forward.
Finally, as I've previously noted, payment coins and protocol tokens that skyrocket higher often wind up giving back the lion's share of their gains in the 12 to 26 months following their respective peaks. The payment and protocol tokens I examined all fell by 93% to 99%+ within 26 months after hitting their all-time highs. This makes it far likelier that Shiba Inu heads to the doghouse than $0.01 by 2023.
