Shiba Inu (SHIB +2.52%) has amassed a following among a certain group of cryptocurrency enthusiasts who value community and follow the hype. It probably helps that Shiba Inu's price has climbed astronomically since its launch in August 2020, despite the extreme volatility.
As of April 17, this meme token is trading for a gut-wrenching 87% below its all-time high. That record was established in October 2021, at the tail end of a strong run for both stocks and cryptocurrencies. Speculative investors could be eyeing the current situation as an opportunity to be more aggressive.
But is Shiba Inu a better buy than Bitcoin (BTC +2.75%), the world's oldest and most valuable cryptocurrency, right now? It's time to compare the two digital assets.
Lacking a fundamental edge
CRYPTO: SHIB
Key Data Points
Shiba Inu currently carries a market cap of about $7 billion. To its credit, a Layer-2 scaling solution called Shibarium was launched to enable faster and cheaper transactions. There are also metaverse updates in the works.
Although it has a relatively large market value, the cryptocurrency doesn't have any competitive strengths. It was built on top of the Ethereum network, meaning it doesn't stand out from a technical perspective. And according to venture firm Electric Capital, Shiba Inu doesn't even crack the top-100 list of cryptos with the most developers working on them.
Given that there are more compelling blockchains out there, especially for decentralized applications, Shiba Inu's real-world utility probably isn't anything to write home about. For example, the network had just $10 million in total value locked on ShibaSwap, its decentralized exchange. That places Shiba Inu 138th on the list of DeFi protocols.
The price has moved based on various hype cycles, which presents a very risky proposition for true investors. Crypto industry observers will point out that perhaps having a strong fan base counts as having fundamental value, as cryptocurrencies depend on their communities of supporters to keep them relevant. This argument is valid, I think, but eventually the excitement will fade away unless there are positive developments.
We're seeing this play out right before our eyes. Shiba Inu's price has experienced some short-lived run-ups in the past year or so. These were followed by drastic price declines. The fact that the token continues to trade substantially below its peak is an indication that investors are losing interest.
Competition plays a part here, too. There are a large number of cryptocurrencies out there, with new ones being created all the time. Market participants interested in betting on short-term price movements will always gravitate to whatever is hot at any particular point in time.
In a league of its own
CRYPTO: BTC
Key Data Points
Bitcoin stands head and shoulders above Shiba Inu. The former has a fixed supply cap of 21 million coins, supporting its impressive scarcity. The latter has more than 589 trillion tokens in circulation, a staggering figure that ongoing coin-burning activities are barely putting a dent in.
Bitcoin is fully decentralized, with no single entity in control. And it's becoming a more widely accepted store of value and investable asset. Some of the largest asset managers offer spot Bitcoin exchange-traded funds (ETFs) to their customers. Companies are building products and services that support a growing financial ecosystem that enables Bitcoin use. Even the White House announced the creation of a Strategic Bitcoin Reserve, underscoring the importance of owning this asset.
Shiba Inu's price could soar at any moment, but it's not a smart long-term investment for your hard-earned savings. A decade from now, Shiba Inu might not even exist. The price might keep heading lower toward irrelevance.
Bitcoin, on the other hand, has the durability, track record, and regulatory buy-in that should drive its price higher in the future.
