It's not hard to see why some investors are enamored with the cryptocurrency market. Although digital assets carry with them elevated levels of volatility and risk, if you're lucky enough to pick a winner early on, the returns can be truly astronomical.
This was the case with Shiba Inu (SHIB 0.40%) in 2021, as the dog-themed cryptocurrency skyrocketed thanks in part to the meme stock craze. But the token has come crashing down.
Risk-seeking investors might be inclined to buy this crypto on the dip. I think that's the wrong move. In fact, I view Shiba Inu as one cryptocurrency that should be avoided no matter what.
A rising tide doesn't lift all boats
This year has been a terrific one for cryptocurrencies. The overall market's value has climbed from about $800 billion at the start of 2023 to just over $1.4 trillion today. This tremendous gain easily outpaces what the Nasdaq Composite index has been able to produce for investors.
However, it's discouraging for Shiba Inu believers to see that the meme token hasn't participated at all in the broader market's rally. It's been a disappointing year. Shiba Inu's price is essentially flat compared to where it was on Jan. 1, 2023. Apparently, a rising tide doesn't lift all boats.
Could the crypto community at large be losing its interest in Shiba Inu right before our eyes? That certainly appears to be the case. If this token's value doesn't rise this year, in an extremely bullish market environment, then it's easy to be overly pessimistic about its prospects.
Is this even necessary?
Shiba Inu was developed to be more functional than Dogecoin, so it was built on top of the Ethereum blockchain. This makes it compatible with numerous decentralized applications (dApps).
And to increase transaction throughput and lower fees, a scaling solution, known as Shibarium, was recently launched. The hope is that technical upgrades will make Shiba Inu more attractive to users and developers, while at the same time incentivizing the formation of dApps, including decentralized finance protocols and non-fungible tokens.
To date, it can be argued that Shiba Inu hasn't made much progress in these areas, especially when compared to a network like Ethereum.
Consequently, a very valid question to ask is whether Shiba Inu is even necessary. What problem does it really solve? The same thinking can be applied to tens of thousands of other cryptocurrencies as well.
In the long run, Shiba Inu's survival is entirely dependent on the kinds of use cases and adoption it can create. But so far, there really isn't anything to be optimistic about.
One (not so smart) reason to buy
What I just discussed helps support the argument that Shiba Inu should be avoided at all costs, and that buying this token is a losing proposition.
But there is one reason that I can come up with for why some investors would still want to put money behind this blockchain network. And that's pure financial speculation.
Like many useless cryptocurrencies out there, Shiba Inu can see its price soar in no time should a prominent businessperson publicly discuss support for it. In other words, hype could quickly build for this token for no fundamental reason, and this could have the potential of sending Shiba Inu higher.
Of course, this is no smart way to invest your hard-earned savings. Trying to predict when excitement will surround a particular token is an impossible task.
Focus on the fundamentals. By doing so, you'll realize that Shiba Inu deserves no place in your portfolio.
