The cryptocurrency sector has been on a tear recently, and investors have taken notice. One of the most popular digital currencies is Shiba Inu (SHIB 0.70%), a token that's made waves on social media due to its dog mascot and also its incredible returns since inception.
Since the token launched in mid-2020, returns for early investors have been incredible. Given an initial price of $0.00000000051 per token, an investment of $1,000 in August 2020 would be worth more than $28 million today, at a price of $0.00001435 per token. That's an absolutely mind-boggling return, and one that's clearly invited speculators to consider adding this token on momentum rallies.
Indeed, considering the strong momentum we've seen to kick off 2023, it's not surprising to see Shiba Inu continue to dominate the interest of traders and speculators in this market. Now, the question is whether this momentum can continue, and whether dips should continue to be bought.
Let's dive into how much potential this meme token may hold in 2023.
What is Shiba Inu?
One of the most popular meme tokens in the market, Shiba Inu is an Ethereum-based altcoin using the Japanese Shiba Inu dog breed as its symbol. This token is often viewed as a competitor to Dogecoin. Some have given Shiba Inu the "Dogecoin killer" title for the token's impressive rise to within a few spots of the cryptocurrency rankings by market capitalization.
These "meme tokens" derive their value mainly from their community and their following. Often known as tokens that don't provide much in the way of real-world utility, these dog-inspired cryptos certainly have among the most vibrant investor and enthusiast communities in the crypto sector. While such followings are difficult to value, it's clear that much of the speculative hype-driven appreciation seen with SHIB and DOGE wouldn't have been possible without them.
Like Dogecoin, Shiba Inu appears to have initially been launched as a joke. However, given the upcoming launch of its Layer 2 upgrade, Shibarium, as well as the recent listing of its Bone Shibswap (BONE) token, some investors are starting to price in meaningful utility for this network, largely because of the size of Shiba Inu's engaged community.
There are reasons to be bullish and reasons to be cautious
It's been a very solid year for all cryptocurrencies thus far. Indeed, meme tokens such as Shiba Inu are back to their 2021 form, posting incredible gains in short time frames. For aggressive momentum investors who catch the wave at the right time, this can provide significant trading gains.
However, for most conservative long-term investors, it's also clear that there are many more reasons to be highly cautious with meme tokens. The fact that these cryptos don't really provide any sort of meaningful value right now means investors are buying into a story, and that story may or may not become a reality. And while the Shiba Inu community is vibrant and extremely optimistic (and there's clearly some value that can be attributed to this), it's hard to place a quantifiable value on such a network.
Thus, what we're left with is a token that's clearly a high-risk, high-upside option best served in a bull market. I'm not sure we're in the midst of a bull market rally right now. Indeed, 2022 showed investors just how impressive near-term bear market bounces can be. Accordingly, I think now is not the time to buy the dip on Shiba Inu, based on another potential leg down in the markets if the "soft landing" scenario that is being priced in doesn't materialize.
