You can do all the fundamental analysis you want, but sometimes winning in financial markets comes down to sheer luck and diamond hands. Don't believe me? Simply ask early investors in Shiba Inu (SHIB +1.24%).
According to analysis from CoinMarketCap, the meme coin posted a total gain of 11,430,362%, at one point before falling back down to earth in 2021, despite having no real-world advantage over other cryptocurrencies.
Shibi Inu's record-breaking rally has kept it relevant in the cryptocurrency community, even though it is somewhat overshadowed by larger and more serious alternatives. Let's explore what the next 12 months might have in store and try to decide if the asset will soar again.
What is Shiba Inu?
Unlike the more mainstream blue chip cryptocurrencies, which exist on purpose-built blockchains, Shiba Inu is an ERC-20 or fungible token programmed on the Ethereum network. Fungible tokens are all identical and interchangeable, which means they can be used as cryptocurrencies. And this is the core difference they have compared to ERC-721s -- also known as non-fungible tokens (NFTs), where each unit is unique.
CRYPTO: SHIB
Key Data Points
The crypto's role as an ERC-20 has given it several key advantages. For starters, this strategy likely dramatically reduced the development time and cost to launch the platform compared to creating a brand-new blockchain.
ERC-20s also benefit from Ethereum's transaction capacity, programming language Solidity, and continuous upgrades. And this designation can give an obscure token like Shiba Inu more trust because it is associated with the well-established Ethereum network.
That said, being an ERC-20 also comes with some challenges. Shiba Inu shares the Ethereum network with thousands of other tokens, which can lead to network congestion during periods of high volumes. Network fees are currently $0.32 per transaction, but can often rise to more than $2.
Can Shiba Inu set itself apart?
Aside from popular stablecoins like Tether, the vast majority of top cryptocurrencies have custom blockchains. This suggests investors might prefer them for their often-superior technical performance and perceived seriousness. But while Shiba Inu struggles to shake its meme coin stigma, that doesn't mean its developers aren't trying.
They have created a decentralized ecosystem of platforms related to the crypto. These include a decentralized exchange called ShibaSwap, designed to allow users to swap tokens and earn rewards through a process called "burying," which is similar to staking in proof-of-stake (PoS) networks. This process involves users locking up a portion of their tokens for a set period of time in return for new tokens.
Image source: Getty Images.
The annualized yield for staking Shiba Inu varies. But according to the cryptocurrency exchange Kraken, it currently stands at just 0.1%, which isn't much to get excited about when the S&P 500 has an average dividend yield of 1.1% and Solana's yields can reach as high as 9% according to data from Kraken.
Shiba Inu's attempts to differentiate itself seem to have fallen flat so far. And investors shouldn't expect it to become more competitive anytime soon.
Where will Shiba Inu be in 1 year?
Shiba Inu's token-specific factors probably won't have a significant impact on its performance during the next 12 months. Ultimately, this is still a hugely speculative asset that will move based on industrywide momentum. The good news is that some encouraging regulatory changes could help push the entire cryptocurrency sector further into mainstream acceptance.
The Trump administration has directed the Securities and Exchange Commission to take a softer approach to crypto regulation by prioritizing clarity over enforcement actions like lawsuits. The administration has also called for creating a U.S. Bitcoin Strategic Reserve and pushed through the Genius Act to encourage stablecoin adoption.
Although investors shouldn't expect Shiba Inu to outperform mainstream assets over the long term, it can enjoy brief bursts of growth in periods of positive sentiment.
