Assets whose prices have gone up in the past are more likely to continue appreciating in the future. This is a rational way for investors to think.
The opposite point of view is also something to consider. If an asset's price has fallen over an extended period of time, then that might not bode well for its success going forward.
Let's apply this perspective to one of the most popular meme tokens out there, Shiba Inu (SHIB 1.00%). The cryptocurrency certainly produced life-changing returns during its incredible hot streak in 2021. But it now trades 93% below the peak from more than four and a half years ago (as of April 23).
This disappointing trend raises the question: Is Shiba Inu going to $0?
Image source: Getty Images.
This meme coin's best days are in the past
Since Shiba Inu hit its all-time high on Oct. 27, 2021, the S&P 500 index has climbed 56%. During that same period of time, Bitcoin has risen by 29%. The speculative token's poor performance can't be blamed on a softer market environment for risk assets.
This implies that there are factors at play specific to Shiba Inu that work against it. It lacks the potential for innovation because of its virtually non-existent group of developers. It has minimal acceptance as a method of payment for merchants. And there aren't any fundamentals to lean on.
Anything is possible, of course. If the cryptocurrency market experiences the same levels of exuberance that it did in 2021, Shiba Inu's price could soar in no time. This would be characterized by excessive risk-taking and gambling behavior on the part of market participants. The gains, however, likely won't last, since the excitement will surely fade as investors turn their attention to the next shiny thing.
Having a community of supporters is worth something
Looking out five or 10 years from now, I don't believe Shiba Inu will go all the way to $0. If past trends persist, there's no doubt that it will continue to lose the attention of crypto investors. Competition from other speculative tokens will also make it difficult to attract capital.
But this meme token has a strong community of supporters, known as the ShibArmy, that promote and advocate for Shiba Inu. I think this social aspect has value, ultimately placing a floor on Shiba Inu's price somewhere between where it is now, at $0.000006166, and $0.
Coin burning, a process that involves sending tokens to dead wallets to remove them from circulation, is also something to keep in mind. While the current number of coins being burned is trivial, if the pace significantly picks up, it might provide a tailwind to Shiba Inu's price.
