Until recently, the stock market was enjoying one of its strongest bounces from a bear market bottom in history. It took a little over a year for the benchmark S&P 500 to double in value from its pandemic intra-day low. But when compared to the cryptocurrency space, the gains in stocks look like peanuts.
Since the pandemic low of March 2020, the aggregate value of digital currencies has catapulted almost $1.6 trillion, which translates into a move of more than 1,100%. While Bitcoin and Ethereum, which account for approximately 62% of total crypto market value, are responsible for a significant portion of this nominal value increase, it's lesser-known coins like Shiba Inu (SHIB -8.64%) that have been courting droves of new investors into the crypto realm.
Shiba Inu's historic gain lured new investors into crypto
If you're wondering, "Why Shiba Inu?" look no further than its jaw-dropping return last year.
When the bells tolled at midnight on Jan. 1, 2021, a single SHIB token could be purchased for a microscopic $0.000000000073. But in less than 10 months, these same coins would hit their all-time high of $0.00008841. In removing six zeroes after its decimal point, SHIB delivered a peak intra-year gain of (drum roll) better than 121,000,000%. Put another way, investing $1 at midnight on Jan. 1, 2021 would have made you a millionaire, as of SHIB's peak on Oct. 27.
Even factoring in that Shiba Inu sold off considerably to end 2021, it's unlikely we'll ever see a yearly gain of around 46,000,000% again for an investable asset. Life-altering gains like this are more than enough to attract new investors.
Of course, Shiba Inu had some help. For instance, crypto market dynamics helped the previously unknown token succeed. Whereas it's relatively easy to bet against stocks by short-selling shares and/or purchasing derivatives (like put options), these same tools may not exist in the cryptocurrency arena. With the exception of Bitcoin, there aren't any derivative options for skeptics to use to bet against lesser-known digital currencies. What's more, not all crypto exchanges allow short-selling. All this created a natural buy bias that Shiba Inu fully exploited.
Increased visibility didn't hurt, either. A number of crypto exchanges chose to list SHIB for trading last year. When coupled with the July launch of decentralized exchange ShibaSwap, it created a scenario where trading liquidity improved drastically in a very short time frame.
Can Shibarium and metaverse chatter push SHIB to $0.0001 by the end of 2022?
But according to Shiba Inu's more than 1.14 million unique holders, their token could offer an encore performance in 2022 (and beyond). While gaining another 46,000,000% isn't on the table, a near-quintupling in value to $0.0001 -- SHIB tokens are changing hands at $0.00002064 at the time of this writing -- may be in the cards by the end of this year.
The single biggest catalyst in 2022 is the expected public launch of internally developed layer-2 blockchain project Shibarium.
Without getting overly technical, Shiba Inu is a token built on the Ethereum blockchain. Though Ethereum is a highly trusted blockchain, being tethered to this popular network means having to deal with Ethereum's high transaction fees and occasional processing lags. Shibarium's purpose is to substantially lower transaction fees to make using SHIB more economical as a form of payment.
At the moment, there is no set launch date for Shibarium. However, it was reported earlier this year that Shibarium was undergoing its second round of private testing. The expectation continues to be that it'll be ready for its public debut around the midpoint of 2022, which is rapidly approaching.
Shibarium is Shiba Inu's key to ecosystem development. The project's developers previously announced plans to create blockchain-based games, and sell digital plots of land, known as "Shiba Lands," in its own iteration of the metaverse. These Shiba Lands, as well as characters within blockchain-based games, will be stored as non-fungible tokens (NFTs). For an NFT marketplace to thrive, transaction fees have to be minimal -- thus, the importance of successfully launching Shibarium sooner than later.
Considering that Shiba Inu was one of the most searched cryptocurrencies in the U.S. in 2021, a social media-driven boost that results in SHIB eating another zero can't be ruled out.
Shiba Inu's "show-me" moment is likely to disappoint
However -- and this is a pretty big "however" -- virtually all signs and data points suggest Shiba Inu's chances of reaching $0.0001, let alone ending the year there, are extremely low.
The most glaring issue with Shiba Inu is that it doesn't stand out from the thousands of other innovative cryptocurrency projects. As an ERC-20 token built on the Ethereum blockchain, SHIB is, ultimately, nothing more than a payment coin. It's surrounded in market value by other projects that offer smart contracts and the ability to develop decentralized financial and nonfinancial applications. Without any game-changing utility, it's difficult to envision Shiba Inu remaining relevant over the long run.
As I've previously pointed out, Shiba Inu isn't even a particularly popular or prominent payment coin. Online business directory Cryptwerk lists only 659 merchants as accepting SHIB for payment, and the vast majority of these merchants are obscure. Given Shiba Inu's high transaction costs and heightened volatility, it's unlikely a large number of merchants will be willing to accept it as a form of payment.
Another reason to be skeptical of Shiba Inu is the rapidly waning interest in NFTs and metaverse investments. Between mid-January and mid-April, Google Trends search interest in the term "NFT" declined by 65%. Not to be outdone, search interest in the term "metaverse" is down by almost 75% since late October. Following the launch of Shibarium, there's a real chance Shiba Inu's gaming and metaverse projects may disappoint.
The nail in the coffin is historic precedence. With the exception of Bitcoin, life-altering gains among payment coins have resulted in equally epic pullbacks ranging from 93% to more than 99% in the roughly two years following their respective peaks. With Shiba Inu gaining as much as 121,000,000% in 2021, a sizable and lengthy downtrend is what should be expected.