When searching for bargains in the always-volatile crypto market, it's easy to run across landmines. Typically, these are cryptos that are trading at unusually low prices, but that are nonetheless the subjects of a lot of hype and speculation. Often, they are tokens that have produced spectacular gains over periods in the past, which can make it harder to recognize their flaws.
With that in mind, ApeCoin (APE +0.33%) and Shiba Inu (SHIB +0.99%) are two cryptos to avoid, no matter what. Both have significantly underperformed the market in 2023, and both show few signs of turning things around anytime soon.
ApeCoin
When it debuted in early 2022, ApeCoin seemed to have unlimited upside potential. After all, the prospects of ApeCoin were tied directly to the performance of the Bored Ape Yacht Club, which is still the most successful non-fungible token (NFT) collection in history. New brand extensions for the Bored Ape Yacht Club were in the works, including new digital gaming and entertainment experiences, as well as real-world products and services. Some even speculated that the Bored Ape Yacht Club ecosystem might become the foundation for a modern entertainment brand -- a Walt Disney for the NFT era.
But guess what? The NFT market cratered in 2022, and it hasn't recovered. That has had a devastating impact on ApeCoin. From January 2022 to July 2023, monthly NFT trading volumes are down 81%. Floor prices for NFT collections are now at two-year lows, and just about everyone admits that investor enthusiasm for "digital collectibles" such as NFTs is at an all-time low.
CRYPTO: APE
Key Data Points
Against this backdrop, ApeCoin is the worst-performing crypto this year among the top 100 cryptocurrencies tracked by CoinMarketCap. For the year, it is down a staggering 65%. It might be tempting to take a closer look at ApeCoin now that it is trading at around $1.30, nearly 97% below its all-time high of $39.40. But until and unless the NFT market recovers, it's hard to imagine how the Bored Ape Yacht Club ecosystem is going to recover. And that is going to make it almost impossible for ApeCoin to soar in price. This is a crypto to avoid at all costs.
Shiba Inu
Former crypto darling Shiba Inu has a history of delivering massive returns to its holders, but it has been a couple of years since it was on an upward trajectory. The launch of the much-hyped Shibarium project this August was supposed to be the big catalyst that sent Shiba Inu soaring again, but that simply hasn't been the case. Over the past 30 days, Shiba Inu is down by about 20%. The crypto is even further into negative territory for the year.
Shibarium had a turbulent launch, and there are growing doubts about how much it will really add to the value of Shiba Inu. The big hope was that Shibarium -- a Layer 2 scaling solution for the blockchain -- would usher in a new era of digital gaming and entertainment experiences. But that now seems to be more hype than reality.
Image source: Getty Images.
Even more worrisome, it's still not clear how Shiba Inu plans to address its biggest problem: its massive circulating coin supply of 589 trillion tokens. Anyone who expects Shiba Inu to suddenly skyrocket to $1 and make them crypto millionaires needs to recognize -- that would give the token a market cap of $589 trillion! That's nearly 200 times Apple's current valuation of almost $3 trillion.
Granted, there is now speculative talk of a new coin-burning mechanism that could eliminate 111 trillion coins from circulation each year. That's an outlandishly large number, yet it still would do little to bring Shiba Inu's coin supply issue under control for at least another five years. Even as a long-term investor, are you willing to wait five years to see any kind of price appreciation at all in what is generally acknowledged to be a viral meme coin with little to no real-world utility? Sorry, Shiba Inu fans, but this crypto is all bark and no bite.
Buyer beware
Certainly, there are hyper-optimistic scenarios under which both ApeCoin and Shiba Inu could achieve long-term success. But a long-term investing approach based on bored apes and cute dogs is not one that I can support. There are simply too many problems with both of these cryptos that could take years to be solved, if they ever are.
So buyer, beware. Anytime you see a crypto that's the subject of a lot of hype and speculation, and is trading at unusually low prices, make sure you do your due diligence. Your portfolio will thank you later.
