Owning cryptocurrencies has no doubt made some lucky and bold early adopters wealthy beyond their wildest dreams. Shiba Inu (SHIB -8.32%), to provide an extreme example, soared more than 20,000,000% in 2021, which has to be one of, if not the single greatest one-year returns in investing history. Along the same vein as many other digital assets, however, this is the result of major speculation above anything else. Furthermore, it is unlikely ever to be repeated.

Despite that monster return, Shiba Inu is now down an incredible 89% from its peak (as of June 29). And while it might be tempting to buy some SHIB in hopes of a huge price upswing, it is now one of the cryptocurrencies you should avoid no matter what.

No competitive edge

Launched in August 2020 as a dog-inspired alternative to Dogecoin, Shiba Inu is an ERC-20 token, meaning it runs on the Ethereum (CRYPTO: ETH) blockchain. This results in SHIB being compatible with the entire Ethereum ecosystem, but it translates to no serious differentiation for Shiba Inu compared to the seemingly unlimited number of other ERC-20 tokens out there. Because Shiba Inu lives on top of Ethereum, it has the same technical characteristics as the latter. Therefore, it doesn't really stand out from the crowd for users or developers.

Compare this with the two most valuable cryptocurrencies out there. With its first-mover advantage and global recognition, Bitcoin (CRYPTO: BTC) is slowly becoming widely viewed as a legitimate store of value. And with the development of the Lightning Network, the potential for Bitcoin to be adopted as a true decentralized internet currency is certainly not out of the realm of possibilities.

Then there's Ethereum, which was created to introduce a key feature that Bitcoin didn't have -- smart contracts. Known as the world's decentralized computing platform, Ethereum has become a hotbed for developing decentralized applications that allow two unrelated parties to interact and transact without a central intermediary.

With the success of Bitcoin and Ethereum, it's no wonder these two top digital assets have a combined value of $516 billion as of this writing, a far cry from Shiba Inu's current market cap of $6 billion.

Pure speculation

With no real competitive edge in the crowded field of tens of thousands of cryptocurrencies, the only motivation someone would have to buy SHIB today is based purely on speculation. It's akin to being at the casino and putting your chips on something with an incredibly low probability of success. Many are hoping for SHIB to experience a massive price run-up like it did during the summer of 2021 when the meme-stock craze also lifted certain digital assets to new heights. This is not a sound financial strategy.

Shiba Inu is introducing a layer-2 solution known as Shibarium, which hopes to lower transaction fees and introduce a token-burning mechanism. And a Shiba Inu metaverse has also been developed. But as I already alluded to, these don't possess any special features that aren't already available. In fact, Shiba Inu is behind when it comes to new introductions in the crypto space. 

Making things worse is that Shiba Inu currently has 549 trillion tokens outstanding. The project was meant to have an abundant supply of tokens, making it unlikely that the price of one SHIB could soar very high. Not only does demand for SHIB need to outweigh the existing supply on the market, but it must also exceed any new SHIB tokens created. A burn strategy has been implemented, but this is more like financial engineering than actually adding any real value to the network.

If you're interested in investing in cryptocurrencies, it's best to avoid Shiba Inu. There are other promising digital assets out there to consider.