Shiba Inu (SHIB 2.00%) made history as one of the fastest-growing cryptocurrencies in the world, experiencing explosive growth throughout 2021.
However, it's currently down a whopping 86% from its peak in October. While many investors believe Shiba Inu is past its prime, some are still hopeful that it could make a dramatic comeback.
If the cryptocurrency is preparing for a rebound, now could be the time to buy the dip. But is that really the right move? There are a few factors to consider before you invest.
Why you may want to avoid Shiba Inu for now
1. It's up against stiff competition
Shiba Inu is built on the Ethereum (ETH 0.60%) blockchain, which means it's subject to the same roadblocks as Ethereum itself -- primarily high transaction costs and sluggish speeds. That has made it difficult for Shiba Inu to scale.
Developers are working on an update to potentially change that, though. Shibarium is a layer-2 solution designed to dramatically lower transaction costs and increase speeds, and it will also make it easier for Shiba Inu to compete in the decentralized application (dApp) space. The cryptocurrency already has its sights set on metaverse projects, and Shibarium could potentially be a huge catalyst for growth.
However, it's still far behind the major players in this space. Networks like Ethereum, Solana (SOL -1.41%), and Cardano (ADA -0.24%) are already leaders in the dApp sector, and they have a significant leg up over Shiba Inu. Even after Shibarium launches, it may be tough for Shiba Inu to catch up to its larger competitors.
2. It will have to overcome its reputation
Shiba Inu's rise to fame was based mostly on hype over substance. Although developers have been working hard to increase the crypto's utility, Shiba Inu's reputation as a meme coin could put it at a disadvantage.
The crypto sector is cutthroat, and it will be challenging for any cryptocurrency to thrive. While Shiba Inu does have a devoted fanbase, in order to see substantial growth, it will need to prove that it's more than just a pump-and-dump scam, as it's sometimes been referred to in the past.
This isn't impossible, and there's always a chance that it could make a remarkable recovery -- especially if it continues making improvements to its platform. But many investors are understandably skeptical, which means Shiba Inu may need to work harder than its competitors to achieve the same level of growth.
Why you might consider buying the dip
1. You're willing to take a risk for the chance at a significant payout
Despite being a relative underdog, Shiba Inu is still the 14th largest cryptocurrency with a market cap of more than $6.5 billion. It's managed to stay afloat despite the odds being stacked against it, and if it gets another round of social media hype, it could see significant returns.
There are a lot of variables at play, and there are certainly no guarantees that Shiba Inu will see long-term (or even short-term) growth. But if it does make a comeback, you could potentially make a lot of money by investing right now.
Before you buy, be sure you're comfortable taking on higher levels of risk. All cryptocurrency is speculative right now, and Shiba Inu has several major hurdles to overcome before it can thrive. But if you're willing to take a major risk for the chance of potentially seeing substantial returns, it may not hurt to allocate a very small portion of your portfolio toward Shiba Inu.
Nobody knows for certain whether Shiba Inu is headed to the moon again. While it has been making improvements in recent months, it has its work cut out for it to stay competitive. It won't be the right investment for everyone, but understanding its advantages and disadvantages can make it easier to decide whether it's a good fit for you.
