With tighter monetary policy conditions and a general risk-off sentiment from the investment community, it's no wonder the crypto market lost roughly two-thirds of its value in 2022. But after the calendar turned on the new year, we're seeing a resurgence. The market cap of the entire industry is back over $1 trillion.
Some digital tokens, such as Shiba Inu (SHIB 0.81%), have gotten off to a hot start, as speculators bet on continued price gains. But even though Shiba Inu is up almost 40% already this year, I don't think it's a good long-term investment. In fact, if you're lucky enough to be sitting on a gain in your holdings, it's a good idea to sell now. Here's why.
No competitive edge
Seeing the shortcomings of Dogecoin, Shiba Inu's founders created its token to be compatible with the Ethereum ecosystem, hoping to draw in more users. This strategy made logical sense, as SHIB worked with various crypto wallets and decentralized exchanges. The founders hoped it would catch on because of its accessibility.
It eventually did catch fire, thanks to the meme-investing craze in early 2021. But apart from a community of supporters who love the dog-themed token, Shiba Inu hasn't found much adoption. According to cryptwerk.com, a crypto and digital listing directory, SHIB is accepted as a method of payment at only 715 merchants worldwide. That's essentially nothing.
I think the ultimate viability of a crypto project depends entirely on its potential for real-world utility. Shiba Inu lacks in this department. What's more, investors have much more promising cryptocurrency networks to look at instead.
Enormous token supply
Another reason to dump your SHIB holdings is the token's enormous supply. There are 549 trillion SHIB tokens in circulation. This silly amount artificially keeps the price of one token insanely low. And to make matters worse, there's nothing stopping the founders from creating new tokens out of thin air whenever they want.
Shiba Inu's supply is so gargantuan that it's virtually impossible for each individual token's value to ever reach $1. At this price, the market cap of the entire network would total $549 trillion. Not only is that much higher than the market caps of Apple, Microsoft, Alphabet, Berkshire Hathaway, and ExxonMobil combined, but it's around the total amount of household wealth worldwide (according to data from McKinsey).
This means that SHIB's price will remain at fractions of a penny for the foreseeable future.
Catalysts won't move the needle
Shiba Inu is slow and expensive. Developers have been working on a Layer 2 scaling solution, known as Shibarium, to lower transaction fees and increase throughput. There are also plans to introduce a native stablecoin.
Additionally, Shiba Inu could fully introduce a metaverse powered by non-fungible tokens in the near future. With it, users will be able to buy digital land, interact with other users, play games, and earn passive income. But even if Shiba Inu can successfully launch Shibarium and the metaverse, I'm not convinced they will catch on.
Why would any skilled developers or enthusiastic users be inclined to take their time and money to Shiba Inu when there are much more promising crypto projects out there? Ethereum, Cardano, and Solana all have huge developer networks helping to lay the foundation for greater use of decentralized applications. And they actually possess innovative features that help them stand out in a crowded industry.
There's no doubt that the cryptocurrency market is experiencing a quick bounce-back to start the year, and this situation might entice investors to speculate on Shiba Inu to try to profit from the momentum. But it's best to focus on the things that matter, like the underlying fundamentals of the digital token. With this in mind, it's a good idea to sell Shiba Inu and direct your capital elsewhere.
