For more than a century, the stock market has been one of the greatest wealth creators on the planet. Including dividends paid, the benchmark S&P 500 has delivered an annualized return of around 10% since its inception in 1957. For those of you keeping score at home, this sort of return allows for an investor to double their money, on average, about once every seven years.
But over the past decade, cryptocurrencies have turned this traditional moneymaking strategy on its head. The volatility and momentum associated with digital currencies have led to some truly jaw-dropping gains. Perhaps no cryptocurrency is more responsible for setting the bar high -- at least when it comes to one-year returns -- than meme coin Shiba Inu (SHIB 1.47%).
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Meme coin Shiba Inu made history in 2021
In August 2020, when Shiba Inu made its debut, it was one of thousands of nondescript tokens looking to make a name for itself in the digital currency space. It was not uncommon for the total daily trading volume in SHIB to come in below $500 in the months following its debut, based on data from CoinMarketCap.com.
When the clock struck midnight on Jan. 1, 2021, investors had the opportunity to scoop up SHIB coins for just $0.000000000073. This low price was a reflection of Shiba Inu's creator placing 1 quadrillion tokens in circulating supply. But between Jan. 1, 2021 and Oct. 27, 2021, Shiba Inu did something that may never be repeated again by an investable asset.
At its peak on Oct. 27, a single SHIB token set investors back $0.00008841. While it might be difficult to decipher with so many zeroes following its decimal point, Shiba Inu gained an almost unfathomable 121,109,489% in under 10 months. Put another way, a $1 investment at midnight on Jan. 1 would have made you a millionaire by late October.
The big question on the minds of SHIB holders and cryptocurrency investors is whether Shiba Inu has an encore performance in the works. Although it eventually pulled back to finish 2021 higher by a "pedestrian" 46,000,000%, Shiba Inu enthusiasts still believe it can reach $0.001 (one-tenth of a penny).
What would it take for Shiba Inu to rally close to 8,900% and hit $0.001 in 2023? Let's take a closer look.
SHIB would need a lot to go right in order to hit $0.001
The first thing to understand about digital currencies is that there aren't many tangible catalysts for investors to wrap their hands around. For Shiba Inu, the one clear-cut catalyst that provides make-or-break potential in 2023 is Shibarium.
Shibarium is a layer-2 blockchain project currently under development. Without getting overly complicated, layer-2 blockchain is a series of secondary solutions overlaid atop existing blockchain to enhance functionality. Shiba Inu is an ERC-20 token that's built on the Ethereum (ETH -1.68%) blockchain. While Ethereum's network is highly trusted, it has a tendency to bog down due to its popularity. Additionally, transaction fees can soar during these periods of congestion. The purpose of Shibarium is to drastically reduce transaction fees.
As of this writing, there's no set date for when Shibarium will be beta-tested in public view. Nevertheless, rumors have been swirling on social media that this public test is coming relatively soon.
Shibarium is the foundation for all of Shiba Inu's other potential ecosystem ventures. In particular, developers want to create blockchain-based games that utilize non-fungible tokens (NFTs). Not only are these games a lead-in to future metaverse ambitions, but they're expected to fuel a marketplace where NFTs can be bought and sold. Ensuring that transaction fees are negligible is critical to getting this NFT marketplace and blockchain-based gaming off the ground.
As for less tangible catalysts, SHIB would need a historic amount of social media buzz to drive its token price to $0.001. During its monumental run-up in 2021, platforms like Twitter and Reddit were flooded with Shiba Inu mentions. With momentum playing such a key role for digital currencies, the fear of missing out (FOMO) would be important.
Lastly, there would almost certainly need to be a large coin burn event. Coin burn involves sending tokens to a dead blockchain address where they can no longer be accessed. In other words, it removes coins from the circulating supply and, in theory, makes each remaining token that much more valuable. It's somewhat similar to a publicly traded company enacting a stock buyback. With an estimated 549 trillion SHIB coins still in circulation, per CoinMarketCap.com, a big burn event would be needed to pump up the value of each remaining token.
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Shiba Inu getting sent to the doghouse is more likely
But can Shiba Inu truly rally almost 8,900% in 2023 and reach $0.001? While anything is possible in the cryptocurrency space, as SHIB has previously demonstrated, there's virtually no chance of this lofty price target becoming a reality this year...or ever.
In order for SHIB to hit $0.001, the development, public test, and launch of Shibarium would have needed flawless execution. Unfortunately, developers have stated that technical issues delayed the public beta test of Shibarium. Further, Shibarium's launch was widely expected last year.
However, the bigger issue for Shiba Inu is that it's unable to differentiate itself from more than 22,000 other cryptocurrency projects. Though it has a loyal following on social media, people cheering in the stands doesn't change the fact that Shiba Inu offers no competitive advantages.
As noted, Shiba Inu is an ERC-20 token on Ethereum's blockchain. This is a fancy way of saying it's just a payment coin -- and there are countless digital currencies that could be used as a payment tool. To add, only 715 merchants on online business directory Cryptwerk were accepting SHIB as a form of payment, as of January 2023. Over the past nine months, only 56 new merchants have come to accept Shiba Inu as payment on Cryptwerk.
Gaming doesn't look as if it's going to differentiate Shiba Inu, either. In January 2022, NFT trading volume totaled $17 billion. By September, Dune Analytics reports that NFT trading volume plummeted 97% to just $466 million. Interest in blockchain-based gaming, as well as NFT trading/ownership, has fallen off a cliff.
To add to this list, coin burn is unlikely to provide the benefit SHIB holders expect or hope for. Though Ethereum founder Vitalik Buterin was able to burn over 410 trillion SHIB coins in 2021 -- Shiba Inu's founder gifted roughly half of SHIB's 1 quadrillion token supply to Buterin -- future burn events won't come anywhere close to this level.
Finally, if Shiba Inu were to reach $0.001, it would have a market value of nearly $550 billion. That'd be bigger than all but five publicly traded companies in the United States and would make no sense given SHIB's complete lack of utility. While $0.001 might be a target SHIB holders like to dream about, it's far likelier Shiba Inu gets sent to the doghouse in 2023.
