Is Shiba Inu Poised to Surge After Hitting A Yearly Low?

The meme coin is trying to claw its way back after seeing its price plummet by 70%.

It hasn't been a good start to the year for Shiba Inu (SHIB) or its investors. The self-proclaimed "Dogecoin killer" has continued its downward spiral, and the price has dropped about 70% from its all-time high set last October, according to data from CoinMarketCap.

Any time the price of a big crypto drops, people wonder if it's a buying opportunity. After all, "buy the dip" is a common piece of investing wisdom. But a dip implies that the price will go back up at some point, and in Shiba Inu's case, that's far from a sure thing.

Shiba Inu doesn't have much to offer as an investment

The thing working against Shiba Inu is that its success so far has been based on hype, not on value. Even with how much the price has gone down, it's still overvalued. At the time of writing, its market cap sits at about $14.7 billion, despite having no competitive advantages over other cryptocurrencies.

Shiba Inu started out as one of the many meme coins trying to emulate the success of Dogecoin (DOGE). Dogecoin was created as a joke and is based on the Doge meme, which features the Shiba Inu breed of dog. Of its imitators, Shiba Inu is the biggest so far. It's available on several of the best cryptocurrency exchanges, and it even briefly surpassed Dogecoin in terms of market cap last year.

The fact that Shiba Inu essentially began as a Dogecoin knockoff hurts its credibility as an investment, and its marketing ploys haven't helped matters. Case in point: In May of 2021, the anonymous founder, Ryoshi, sent half the supply of Shiba Inu tokens to Ethereum (ETH) cofounder Vitalik Buterin.

In Shiba Inu's "woofpaper" (its name for a whitepaper), it claims this was done because "there is no greatness without a vulnerable point." The woofpaper is full of this kind of pseudophilosophy, but sending Buterin so many tokens was ultimately a publicity stunt.

Buterin donated 10% of his Shiba Inu to charity, and then destroyed the remaining 90%. The Shiba Inu team has tried to frame this as a positive and even refers to Buterin as a "friend of Shib."

It's trying to be more than just a meme coin

Shiba Inu was inspired by Dogecoin, but to be fair, its team has at least been developing new projects with it. Last year, they launched ShibaSwap, a decentralized crypto exchange. These kinds of decentralized finance (DeFi) projects are extremely popular and provide an interesting alternative to traditional financial services.

They're also venturing into blockchain gaming. The Shiba Inu team is partnering with William Volk, former vice president of Technology at Activision, to build a play-to-earn game that will use non-fungible tokens (NFTs).

If Shiba Inu's projects are a hit, then its price will likely surge again. However, it's also in a crowded marketplace, as DeFi, crypto gaming, and NFTs are all flooded with projects.

To put it in perspective, decentralized exchanges are a dime a dozen at this point, and Shiba Inu isn't one of the big dogs. The total value locked (TVL) in ShibaSwap is about $250 million. One of the largest decentralized exchanges, Uniswap (UNI), has around $14 billion across its platforms. Despite that, Uniswap's token has a market cap of about $9.2 billion, over $5 billion less than Shiba Inu.

Shiba Inu's not-so-secret weapon

Shiba Inu has one trump card, and that's a very devoted, very passionate fanbase. The ShibArmy, as they call themselves, regularly tout the coin on social media platforms.

The Twitter account for Shiba Inu has 2.6 million followers after less than a year, well more than most of the market leaders. Ethereum has 2.1 million, Solana (SOL) has 1.3 million, and Cardano (ADA) has 800,000. Dogecoin is still ahead here with 2.9 million, but it has also been around for eight years.

Like it or not, popularity matters. We've seen many examples of cryptocurrencies that have made massive price gains because they managed to capture the public's attention. Shiba Inu already did it multiple times.

That being said, I wouldn't recommend buying Shiba Inu in hopes that it will bounce back. Buying based on popularity is a huge gamble, and these meme coins and stocks rarely have continued success. Just look at the charts for Dogecoin, Gamestop, or AMC. Another major threat to Shiba Inu is interest rate hikes, which tend to drive consumers away from high-risk investments.

The best approach is to look for quality long-term cryptocurrency investments. There are plenty of smaller cryptos that could surpass Shiba Inu and have better fundamentals. Invest in cryptos that have growth potential over the next five years instead of those that rely on hype.