Since its introduction to the market in August 2020, Shiba Inu (SHIB 0.71%) has provided plenty of excitement for investors. In the span of less than three years, the price of this digital asset shot up more than 20,000,000% (yup, you read that right) before peaking and crashing more than 90% from peak to trough.
Currently, Shiba Inu is around 88% below its all-time high, as seen in October 2021. Accordingly, for speculators and those bullish on meme tokens, perhaps there's an angle here to see the same sort of multibagger returns we saw in the post-pandemic environment. After all, this token could be as much as a 10-bagger if it simply breaks through its previous all-time high.
That said, there's also significant downside risk, which was on full display during the so-called crypto winter in 2022. While this year has turned out to be much more bullish for speculative assets, if we are headed into a recession, it's difficult to declare that a bottom is in. Tokens like Shiba Inu could be the first to be liquidated if a cash crunch ensues in the broader economy.
Let's dive into what to make of this meme token as we head into an uncertain second half of 2023.
The crypto community continues to gather around Shiba Inu
Let's start with some optimism before we get into the downside case for Shiba Inu.
Shiba Inu's community is perhaps the single most important driver of this token's success. The fact that Shiba Inu, like Dogecoin and its other meme token peers, was started as a joke should surprise no one. However, the community that has materialized around Shiba Inu is impressive. And if the developer team finds a way to monetize this group, perhaps there's some significant value here.
Various crypto pundits appear to believe that Shiba Inu could stabilize around current levels, largely due to the strength of its community and continued buying interest. Additionally, expectations are that a pickup in Shiba Inu's burn rate (which helps reduce the inflationary pressure of issuing new tokens), and the heightened activity on the network that will follow, should lead to prices that are at least stable in the near term.
Of course, Shiba Inu bulls continue to hold steady, hoping for another meme surge to take hold if and when the Federal Reserve pivots and the punch bowl is returned to investors. We don't have any indications that that will actually materialize, which leads me to the bearish angle on this token.
Speculative assets likely to get crushed in a down cycle
Whether we're talking about stocks or crypto, the market has been surprisingly resilient this year. Considering the amount of economic uncertainty in the market right now, it's been quite a nice surprise for many investors, myself included.
That said, we're two months (or potentially less) away from a debt ceiling crisis. There are serious ongoing geopolitical concerns to take note of. And various economic indicators, from the yield curve to bond yields, suggest that a recession is a likely outcome within the next year.
Accordingly, if we are headed into a down economic cycle for any prolonged period of time, Shiba Inu is one of the worst assets to buy right now. When investors need cash, selling speculative investments will likely be a primary source of short-term funding. If it's deciding between paying rent or hoping for a meme rally in Shiba Inu, investors don't really have a difficult decision to make.
Additionally, should interest rates remain elevated for some time and inflation prove stickier than expected, it's going to be hard to justify investing fresh capital in highly speculative investments rather than paying down credit card debt. It's impossible to say if such a deep recession will materialize, but it's also clear that even if the perception that such an event is possible becomes mainstream, then assets like Shiba Inu could sell off in advance of such a situation.
Why I'm staying out
Shiba Inu is certainly an intriguing token with an incredibly robust and eccentric community. In terms of sorting investments from exciting to boring, I can certainly see why some investors would want to dip their toes into this speculative token as a lottery ticket sort of play.
The thing is, lottery tickets are negative-expected-value bets. And in this sort of uncertain market, with so many economic indicators pointing in the wrong direction, I think now would be a foolish time to consider buying the dip on something that's impossible to value.
