Perhaps no cryptocurrency has rewarded investors more in the past few years than Shiba Inu (SHIB -4.92%). Although this dog-inspired token currently sits 89% below its all-time high price from October 2021, it has still skyrocketed nearly 12,000,000% since its introduction in August 2020. Perhaps some investors are ready to buy the dip in hopes of monster gains.
But I believe this would be a costly mistake. In fact, Shiba Inu is a cryptocurrency that is best avoided. Instead, take a closer look at Bitcoin (BTC -2.22%).
The world's top digital asset is poised for an incredible run.
Shiba Inu is extremely speculative
Shiba Inu is a blockchain network that's built on top of Ethereum, making it compatible with a wide range of decentralized applications and cryptocurrency wallets. The issue, though, is that Shiba Inu lacks any sort of competitive edge against the tens of thousands of tokens out there. It doesn't even crack the top 100 cryptos in terms of the number of developers working on it, which doesn't bode well for its future to boost utility and adoption.
To its credit, Shiba Inu has attracted a fervent community of supporters, which helps explain why its market cap is $6 billion, making it the 16th most valuable crypto in the world. Having strong supporters is important and adds value, but it's not something investors should be parking their hard-earned savings behind.
What happens if the hype surrounding Shiba Inu starts to dissipate? There's no way of predicting this ahead of time. And it adds lots of risk to the equation.
Things could already be heading in the wrong direction. In 2023, Shiba Inu's token rose about 30% in value. This significantly lagged behind Bitcoin's gain of more than 150% or Ethereum's rise of more than 90%. And it was a worse performance than even the Nasdaq Composite index. In what was a raging bull market for risky assets, the fact that Shiba Inu trailed in returns might indicate that investor enthusiasm might be down for good.
Those who want to add Shiba Inu to their portfolios should understand that this endeavor is more akin to gambling than true investing. And this should be avoided.
Bitcoin has unreal potential
Even after Bitcoin's huge gain last year, it's poised for another run not only in 2024, but over the long term. The approval of spot Bitcoin exchange-traded funds will help to make this a legitimate financial asset and open up the floodgates of fresh institutional capital to the mix. Higher demand supports a higher price.
The next halving, scheduled to take place in April, will reduce the rate of Bitcoin's supply growth by 50%. Historically, this has been an extremely bullish development. Several months after a halving, the crypto has typically reached new all-time highs.
What makes Bitcoin truly special, however, is that it's a decentralized asset that no single entity controls. Furthermore, Bitcoin will be absolutely finite because there will only ever be 21 million coins in circulation.
Some view this as a huge improvement compared to the current financial system. Central banks around the world have devalued fiat currencies throughout history, printing money and adjusting interest rates with no end in sight, causing uncertainty when it comes to inflation and economic activity. The public debt burden of $34 trillion in the U.S., which will only keep expanding, demonstrates the issue.
Bitcoin is the steady, indifferent solution to this. In other words, it can be viewed as a hedge against financial catastrophe.
Investors looking for a safer cryptocurrency to buy, one that solves a serious problem in the world and that has huge upside over the long term, should consider Bitcoin over the more speculative Shiba Inu.
