Between the March 2020 pandemic trough and January 2022, the stock market delivered what might be its strongest bounce from a bear market bottom in history. Despite this historic rebound, cryptocurrencies have run absolute circles around the stock market over the past two years.
According to data from CoinMarketCap.com, the aggregate value of all digital currencies has soared by more than $1.7 trillion since March 2020, equating to an increase of better than 1,150%! While Bitcoin and Ethereum logically receive a lot of credit for this move -- they comprise a combined 60.5% of aggregate crypto market value on a combined basis -- it's meme coin Shiba Inu (SHIB 0.57%) that's played a key role in driving new investors into the cryptocurrency space.
Shiba Inu-inspired coins soared in 2021. Image source: Getty Images.
Shiba Inu produced a historic gain in 2021
Shiba Inu's lure within the crypto community has a lot to do with its jaw-dropping return in 2021. When the clock struck midnight on Jan. 1, 2021, a single SHIB token set investors back a microscopic $0.000000000073. But in less than 10 months, these same tokens were changing hands at $0.000088. Removing six zeroes after the decimal point resulted in an intra-year gain of more than 121,000,000%!
Even after a sizable pullback over the final two months of the year, Shiba Inu delivered gains in the neighborhood of 46,000,000%. Put another way, investors who put a couple of dollars to work at midnight on Jan. 1, 2021 would have been millionaires by the end of the year.
CRYPTO: SHIB
Key Data Points
Shiba Inu's historic rally came to be as a result of increased visibility, social media momentum, and crypto market dynamics. In terms of the former, Shiba Inu was listed on numerous new crypto exchanges last year. Also, decentralized exchange ShibaSwap was launched in July, which improved liquidity and allowed holders to stake their coins to earn passive income.
Few crypto campaigns generated more buzz than Shiba Inu in 2021. As investors, we've witnessed social media platforms like Reddit and Twitter used to temporarily pump securities. It just happens to be a lot easier to move digital currencies with social media mentions than it is to move publicly traded stocks.
Lastly, SHIB benefited from cryptocurrency market dynamics. Whereas it's relatively easy to short-sell a publicly traded stock or purchase a derivative (e.g., option) on a stock, it can be quite difficult to bet against cryptocurrencies not named Bitcoin. Some crypto exchanges don't even allow short-selling. With Shiba Inu coming out of nowhere to skyrocket in 2021, it created a buy bias in the meme coin's favor.
Image source: Getty Images.
Could SHIB push to $0.01 by (or before) May 2024?
But peruse Reddit, Twitter, or other social media platforms, and you'll see that SHIB holders don't believe their token is anywhere close to a peak. They're looking for an encore performance that eventually takes Shiba Inu to $0.01 per token, perhaps within the next two years.
The $64,000 question is, what would it take to deliver a nearly 43,000% increase in token value by May 2024?
First off, we'd likely need to see considerable coin burn take place. Coin burn describes the act of sending tokens to a dead/inaccessible blockchain address. Once these tokens are taken out of the circulating supply, it can, in theory, make each remaining coin that much more valuable.
Last year, Ethereum founder Vitalik Buterin, who'd been gifted roughly half of SHIB's 1 quadrillion token supply, burned more than 410 trillion tokens by sending them to a dead blockchain address. Although we're not going to see another 410 trillion coins burned at the click of a button, significant coin burn would need to take place to reduce Shiba Inu's circulating coin supply of 549 trillion (per CoinMarketCap).
Another key to Shiba Inu launching into orbit (once again) is the upcoming public rollout of layer-2 blockchain project Shibarium. Shiba Inu is an ERC-20 token built on the Ethereum blockchain, which is a fancy way of saying that it's constrained by the high transaction fees and occasional slow processing times that plague the popular Ethereum network. Shibarium is specifically designed to reduce transaction fees.
Although Shibarium could make SHIB a more attractive payment option for global merchants, its primary purpose is to facilitate blockchain-based gaming. Developers have been clear that they want to create non-fungible token (NFT)-based gaming, as well as sell digital plots of land, known as "Shiba Lands," in its own version of the metaverse. It's imperative that transaction costs drop to make the buying and selling of NFTs economical.
Image source: Getty Images.
A penny for your thoughts...
Compared to this time last year, Shiba Inu has a lot more going for it. ShibaSwap has dramatically increased the median hold period of SHIB on leading crypto exchange Coinbase Global. It's also, presumably, nearing the launch of Shibarium, which doesn't have a set release date for the public.
But in spite of all these positives, there's the insurmountable task of supporting a $5.49 trillion market value if $0.01 were to hit. I can't even justify Shiba Inu's existing market value of $12.8 billion, let alone anything in the trillions.
The biggest problem for this project is that it doesn't offer anything resembling a competitive advantage or lasting differentiation. Don't get me wrong, Shiba Inu has quite the following on social media. But pumping an asset online can only lift sentiment (and valuation) so far. Ultimately, SHIB is nothing more than a payment coin that's surrounded by other crypto projects offering smart-contract-based transactions. These other projects are facilitating decentralized application development, which has game-changing potential. Nothing about Shiba Inu is game-changing.
Something else to note is that Shiba Inu isn't even a particularly useful payment coin. Online business directory Cryptwerk listed just 659 merchants as accepting SHIB for payment, as of April 26, 2022. Keep in mind there are more than 32 million businesses in the U.S. alone.
It's also going to be difficult for Shiba Inu to burn enough coins to have a meaningful impact on its token price. Making a dent into 549 trillion circulating tokens is going to take a long time.
If you need one more reason to believe Shiba Inu has virtually no chance of hitting $0.01 in two years, take a closer look at how other payment coins and payment network protocol tokens have fared after generating life-altering gains in the short run. With the exception of Bitcoin, popular payment and protocol tokens with short-term gains of at least 20,000% retraced by 93% or more within two years after their respective peaks. Considering that SHIB gained as much as 121,000,000% in less than 10 months in 2021, a massive reversion is likely already underway.
