Investing in cryptocurrencies is risky enough because of their massive volatility and lack of regulation. Investing in the altcoin/meme coin space presents an additional challenge because of a lack of differentiation and the fact that most of their value is based on frenetic trading by their fanatical followers. Here are some investing considerations for a potential investor in Shiba Inu.
Shiba Inu’s price soared more than tenfold in October 2021, giving it a peak market capitalization of $41 billion (on Oct. 29, 2021) and became one of the top ten meme cryptocurrencies by this measure. A tweet from Tesla founder Elon Musk on Oct. 3, 2021, featuring a picture of his new Shiba Inu puppy Floki provided the initial impetus for the meme coin’s price surge. Because Musk is one of the most high-profile supporters of Dogecoin and the self-proclaimed “Dogefather,” his cryptic tweets often result in heightened volatility in the cryptocurrency space.
Shiba Inu’s price surge in October 2021 resulted in it almost catching up to Dogecoin’s $36.9 billion market capitalization (as of Oct. 31, 2021), after briefly surpassing it at one point.
It remains to be seen whether Shiba Inu will indeed become “the Dogecoin killer” that its growing community of supporters—known as the SHIBArmy—expects. But at least in October 2021, the stunning price gains of this previously obscure altcoin made Shiba Inu the tail that wagged the Dog(ecoin).
Low per-token price: Even after its impressive gains, Shiba Inu (SHIB) costs a fraction of a cent, so one can buy millions of SHIB tokens with a few hundred dollars. At its peak price of $0.00007482 (on Oct. 29, 2021), $100 would have fetched you over 1.5 million SHIB tokens. Currently, at $0.00002925, $100 will buy you 3.4 million SHIB tokens, more than twice as much.
Limited utility and use case: Though its adherents may point out that Shiba Inu-based NFTs are now available, and its Ethereum base might enable smart-contracting capabilities in the future, Shiba Inu presently has very limited utility and does not have a compelling use case yet.
High volatility: Shiba Inu’s peak market capitalization of $41 billion makes it larger than many S&P 500 companies that have been in existence for decades and that have grown sales and profits for most of that time. In fact, the combined $79 billion value of Shiba Inu and Dogecoin (as of Oct. 28, 2021) exceeded the market capitalization of 388 companies on the S&P 500. On Aug. 2, 2020, SHIB was trading at $0.00000000051, so at its peak price of $0.00007482 (on Oct. 29, 2021), it has gained an astronomical 14,670,488%! This means that $1 invested in SHIB on Aug. 2, 2020, would have been worth a cool $146,705 on Oct. 29, 2021. By mid-2022 the price had fallen to $0.00001040.
That eye-popping return also means that Shiba Inu has achieved its founder Ryoshi’s objective of creating something from nothing in spades. However, those gains may likely have been driven by social-media-fueled speculative frenzy as cryptocurrency enthusiasts look for the next big thing. If the bubble bursts, retail investors who got in at the highs may be left holding the bag.