Buying meme coins like Shiba Inu (SHIB +2.06%) can feel like taking a shortcut to wealth, much like buying a lottery ticket. But the most popular assets are often the ones that are the least appealing to a serious investor.
Sound long-term investing is mostly about finding mechanisms for creating value that keep working after the crowd gets bored and moves on. Shiba Inu doesn't have those, and that's why I wouldn't ever touch it with a 10-foot pole. Here's why I think this way.
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This coin has some utility on paper, but not in reality
One might assume that Shiba Inu is a coin with no utility for any purpose. Given that it's a meme coin, that assumption is very reasonable, but it's technically wrong.
Shiba Inu was indeed originally created without any features beyond having a cute dog as its mascot. However, a development team later created a Layer-2 (L2) network called the Shibarium with the coin at the center. The point of the Shibarium was to create a platform where Shiba Inu could be used for various purposes, all of which would result in some of the coin's enormous supply being burned to then provide a return to investors by increasing the scarcity of their holdings.
That pitch sounds like a step toward real usefulness, but actually nobody is doing any economically meaningful activity on the chain. Right now, it looks moribund, with its total value locked (TVL) sitting at a scant $1.8 million, and with the sum of all chain fees paid on Dec. 12 clocking in at a whopping (drum roll) $16. That's not even enough to buy a decent burger these days.
CRYPTO: SHIB
Key Data Points
Therein lies another key point against buying Shiba Inu. Low activity on the network means that there's effectively zero enthusiasm from investors about its technology, which suggests that there's no way to catalyze better sentiment. It also means there is no economic weight on the chain to fund anything else, whether it's decentralized finance (DeFi) projects or core tech upgrades.
Because Shibarium's big promised tie-in with Shiba Inu is coin burning, if the chain is not generating real usage, the burn narrative becomes somewhere between a mirage and a rug pull. It's simply impossible to burn your way out of a supply problem with a network that is not producing meaningful fee revenue, and you definitely can't build a long-term investment thesis on the idea that maybe usage explodes later without seeing credible early evidence.
The winds of 2021 are not blowing any more
Aside from Shiba Inu's total lack of a mechanism that would plausibly increase its value over time, the macro environment in which it experienced its run to the moon in 2021 no longer exists.
In March 2021, the Federal Reserve kept the federal funds target range at close to 0%, which -- in case you don't remember what the market was like back then -- is utter rocket fuel for investors' speculative appetites, because in that environment cash yields basically nothing when held. Today, the Fed's target range is 3.5% to 3.75%. That difference changes investor behavior by discouraging risk taking to the same degree. And that change makes it much harder for extremely risky assets like Shiba Inu to get traction, as there are many safer options that might still provide an acceptable yield.
So don't buy Shiba Inu on the expectation that the perfect storm of 2021 will occur again if you just wait long enough. In fact, you shouldn't be buying it at all, because it doesn't have a clear way of making you richer, and it probably never will.
