Author: shibainu

Author: shibainu

Are Cronos And Shiba Inu The Next FTX And Solana?

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I believe last week is going to go down as one of the most important in crypto history. The collapse of FTX (FTT-USD) is likely going to create ripple effects throughout the rest of the crypto market and it could potentially even have an impact on traditional finance. The logical question now is who is next? Over the summer, we saw the collapse of Terra (LUNC-USD) result in a contagion effect that also took out 3 Arrows Capital, Voyager Digital (VGX-USD)(OTCPK:VYGVQ), and Celsius Network (CEL-USD).

The FTX collapse has weighed heavily on the entire crypto industry over the last week. While the bear case for FTX Token is self-evident at this point, one coin that was hit particularly hard because of FTX was Solana (SOL-USD). While there is good reason for that, if Solana’s network metrics were performing better, SOL may have shown better resiliency. Crypto investors are now looking at other centralized custodians and wondering if we may see history repeat. Much of the noise online about the next potential shoe to drop has been popular exchange Crypto.com (CRO-USD). The token has taken a beating because of that speculation.

On the chart, we can see $0.10 has served as support during this big downturn following the liquidation events from this summer. That support has broken and CRO appears to be entering a freefall as well. There’s actually good reason to wonder if Crypto.com is having problems. We know from recent reporting by Ad Age the company has been scaling back ad-spending and cutting its staff.

In the months that followed, Crypto.com quietly downsized many of the partnership deals intended to garner mainstream attention for the brand, and in some cases the firm has attempted to pull out from these deals altogether, according to details shared by former and current employees at the company who spoke with Ad Age on the condition of anonymity.

This is not a good look but it doesn’t mean the company is going out of business. It could actually be an indication that Crypto.com has been trying to be more responsible with expenses given the broad market declines of the last several months.

Like FTX, Crypto.com is a well-known centralized crypto exchange. Also like FTX, the company has committed a lot of money through its marketing department. Crypto.com owns the naming rights to the arena where the NBA’s Lakers, Clippers, and NHL’s Kings play. This is among other sports sponsorship deals that include FIFA and Formula 1. Just like FTX before, we’re starting to see funds moving out of known Crypto.com wallet addresses. These are just the Ethereum (ETH-USD) addresses associated with Crypto.com:

After a big spike in fund flow on Friday, we’ve seen three consecutive days of outflow and the worst of it is actually within the last 24 hours – with over $121 million coming out of Crypto.com just in the last day. However, while there are some similarities with FTX from both a marketing strategy and asset outflow problem, we are told there are key differences as well.

On one hand it probably isn’t fair to assume Crypto.com is structured as poorly as FTX simply because it’s a crypto business. On the other hand, how many times do market participants need to learn the same lesson on self-custody? Early this morning Crypto.com CEO Kris Marszalek did an AMA and explained how Crypto.com is different from FTX:

We are not a hedge fund. We do not trade customers’ assets. We also kept reserves 1:1 and that’s very true today.

What we don’t know yet is what Crypto.com’s corporate obligations are. Marszalek said in the AMA that we can expect liabilities clarity in the next few weeks and he also said the company doesn’t collateralize the CRO token. I’d say these are generally positive signs for the customers of the Crypto.com platform. But it still does require trust in both Marszalek and the platform itself to justify keeping assets stored there. To its credit, Crypto.com has worked with Nansen to provide a live dashboard of the company’s self-reported crypto wallet addresses. This allows anyone to see the assets the company has in reserve. It is good transparency, but it does raise another question:

A big concern I see on this token allocation is nearly 22% of the company’s $2.3 billion assets in Shiba Inu (SHIB-USD). SHIB is yet another dog-money meme coin that I personally wouldn’t recommend going anywhere near. But if you are bullish SHIB and worried about Crypto.com’s solvency, this revelation could be cause for concern.

Even though I don’t personally see a need to have SHIB exposure, there are others who disagree. For them, the crypto.com position in Shiba Inu becomes more interesting. With a $2.3 billion balance sheet and 21.74% exposure to SHIB, Crypto.com’s SHIB position is roughly $500 million – or a little under 10% of SHIB’s fully diluted market valuation according to CoinMarketCap. Crypto.com and its users have a very large ability to move the SHIB price lower if those assets get sold. This isn’t quite as large as Binance’s FTT position as a percent of FTT’s market cap a week ago, but it’s bigger than Alameda Research’s SOL position was.

Alameda Research had a $1.2 billion SOL position while Solana’s fully diluted cap was about $17 billion at the end of June. Since Alameda Research had such a large position in SOL and needed to liquidate assets to defend its FTT position, SOL’s price experienced more than a 60% drawdown over the course of just a few days. In this morning’s AMA, Kris Marszalek said Crypto.com’s SHIB position is so large because that’s what the customers on the platform are buying and the company needs to allocate to that asset accordingly in its reserves so that when customers want their SHIB, the company actually has it.

If we trust Marszalek isn’t acting nefariously, there shouldn’t be as much risk in Crypto.com defaulting on customer obligations if the company truly has a 1:1 reserve ratio even if the run on assets on Crypto.com continues and customers start taking self-custody of their SHIB. Even if Crypto.com does actually have solvency problems like FTX, I don’t necessarily see a Solana-like risk here for Shiba Inu unless Crypto.com starts selling the SHIB without customer permission. But that would be an indication of much more severe problems and I view that outcome as very unlikely despite what we just witnessed last week from a peer.

I’ve covered CRO before for Seeking Alpha. That coverage was not positive of the token because staking the asset in Crypto.com’s earning ecosystem had become far more expensive than it was previously. Since that article, the rewards have increased slightly on the lower tiered Visa (V) cards but it still isn’t economical to take advantage of that offer in my view. That may be why CRO makes up such a small portion of Crypto.com’s token allocation. Clients aren’t holding it anymore because there isn’t much reason to.

Just 3.7%, or $54 million, of the $1.5 billion Ethereum-based assets on crypto.com are CRO token. Even though I don’t see much purpose as an exchange token, CRO is still utilized in the Cronos ecosystem.

Despite the large declines in the price of the coin, the TVL measured in CRO is actually now at an all-time high after spiking from 6.75 billion CRO to over 10.42 billion CRO in the last 5 days. Still I would exercise a lot of caution before buying the CRO dip. 54%, or $360 million, of the TVL on Cronos is attributable to one protocol: VVS Finance (VVS-USD), an entity that appears to be a classic high-APY, yield farming protocol destined to fall apart.

Summary

If you’re a Crypto.com user, I recommend using it as an on-ramp not as an asset custodian – at least not with a significant portion of your funds. Crypto.com’s token has been taken to the woodshed over the last few days and you could argue the selloff is overdone given the severity of the decline. But I’d caution buying CRO for its potential utility on the Cronos blockchain. With 75% of the blocks coming from just three entities, the blockchain validation is highly centralized and the DeFi footprint looks to be mostly attributable to the kind of risky protocols that Alameda Research was playing with.

While we don’t know what the other side of Crypto.com’s balance sheet looks like, even if the company is solvent I don’t see a big reason to buy CRO. I’m not a fan of SHIB either but I don’t think SHIB will get the same treatment from Crypto.com that SOL got from Alameda Research.

Bear market. Crypto Winter. Whatever the label; Bitcoin has struggled in a macro environment of interest rate hikes and balance sheet tightening. Despite those struggles, a balanced approach to crypto can work right now. An equal weighted allocation to my Top Token Ideas in BlockChain Reaction is beating a dollar cost averaged Bitcoin position.

SHIB Price History

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Shiba Inu coins first entered circulation in 2020 through a decentralized exchange offering on Uniswap at an initial Shib price of $0.0000000015. According to the Shiba Inu’s price history charts, the price of the Shiba token experienced its first notable rally in May 2021, topping at $0.000038 per Shiba Inu coin.

Another significant rally in the Shiba coin price came in October 2021, when the Shiba Inu coin price reached as high as  $0.000088. Due to the massive Shiba token price increase, Shiba Inu easily outperformed all other digital currencies in 2021, having recorded a nearly 42,000x price increase during the span of the year.

The popularity of Shiba Inu led to listings on most major cryptocurrency exchanges, which means that SHIB can now be bought on Binance, Kucoin, Kraken, and virtually all of the most prominent digital asset trading platforms.

Here is what the historical SHIB price data tells us about key milestones in the token’s price history:

  • $0.00000005 – Our earliest SHIB historical data shows Shiba Inu coins changed hands at $0.00000005 in Jun 2020
  • $0.00000030 – By early Feb 2021, the price of Shiba Inu coin reached $0.00000030
  • $0.00000100 – In the span of roughly a month, Shiba Inu coin’s price tripled to $0.00000100 in March 2021
  • $0.00003000 – Broader crypto bull run pushed SHIB’s price to $0.00003000 in May 2021
  • $0.00008000 – The price SHIB surpassed $0.00008000 in October 2021

With a monumental price increase after its launch, many investors have been looking at the possibility of Shiba Inu token reaching new milestones in the future. While Shiba Inu reaching $1 is all but impossible, lower milestones like $0.001 or even $0.01 remain within the realms of possibility.

For a glimpse into potential future SHIB price movements in addition to the Shiba Inu coin live price, you can follow our algorithmically generated Shiba Inu price predictions that take into account SHIB’s current price and a number of market indicators, including Fear & Greed Index, market sentiment, overall volatility, and more. You can also check the up-to-date market rate of 1 SHIB to USD via our handy crypto-to-fiat and crypto-to-crypto conversion feature.

Shiba Inu Investing Considerations

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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.

The Shiba Inu Ecosystem

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The Shiba Inu ecosystem consists of the following three tokens:

Shiba Inu (SHIB): The project’s foundational currency is Ryoshi. To start, he locked 50% of 1 quadrillion Shiba Inu coins in Uniswap for liquidity purposes and sent the other 50% to Ethereum co-founder Vitalik Buterin for safekeeping. In May 2021, when India was suffering from the Delta variant of coronavirus, Buterin donated more than $1 billion worth of Shiba Inu coins to a COVID-19 relief fund in India. Shortly thereafter, Buterin also burned 40% of Shiba Inu’s total supply by permanently removing it from circulation to a dead wallet.

Leash (LEASH): The second token in the Shiba Inu ecosystem, Leash, is much scarcer than other tokens in the system. With a total supply of only 107,646 tokens compared with trillions of Shiba Inu tokens.

Bone (BONE): There are a total of 250,000,000 Bone tokens in circulation. It is designed to be used as a governance token that will allow the SHIBArmy to vote on future proposals.

Three tokens make up the Shiba Inu ecosystem: Shiba Inu (SHIB), Leash (LEASH), and Bone (BONE).

The Shiba Inu Ecosystem also includes:

  • ShibaSwap: The purpose of DeFi platform ShibaSwap is to be a safe, decentralized place to trade cryptocurrencies. SHIB and LEASH can be bought and sold through ShibaSwap.
  • Shiba Inu Incubator: The incubator hopes to move beyond traditional art forms like painting, photography, and digital rendering to find new ways of honoring creativity.
  • Shiboshis: Shiboshis are NFTs generated by 10,000 Shiba Inus. Each Shiboshi is unique and has different collectible traits.

 

What Is Shiba Inu (SHIB)?

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Shiba Inu (SHIB / USD) is an Ethereum-based altcoin that features the Shiba Inu—a Japanese breed of hunting dog—as its mascot. Shiba Inu has been touted as an alternative to Dogecoin by some; in fact, proponents of Shiba Inu claim it is “the Dogecoin killer.”

Shiba Inu and Dogecoin are meme coins, which means they are cryptocurrencies that derive their name and/or branding from some cultural theme—such as the Shiba Inu dog meme in the case of Shiba Inu. Usually these sorts of joke coins aren’t intended to be actual digital products with utility, but rather satirical creations.

Dogecoin may have been established in December 2013, but Shiba Inu wasn’t created until August 2020 by an anonymous individual or group calling themselves Ryoshi.

The key foundation principles of the Shiba Inu ecosystem are clarified in a “woof paper” (most likely a playful take on white paper), which can be found on the ShibaToken.com website.

The purpose for Shiba Inu’s development was to answer a question: “What would happen if a cryptocurrency project was 100% run by its community?” Its founder Ryoshi attributes its origins to an “experiment in decentralized spontaneous community building.” According to Ryoshi, the power of decentralization within a collective can build something stronger than what a centralized team could ever create.

The SHIBArmy consists of over 500,000 members who proudly uphold its founding principles:

  • This project started with nothing and was created from scratch.
  • Our company was not founded on an existing community or preassembled team; rather,
  • A love of Shiba Inu dogs.

Shiba Inu token is based on Ethereum and hosted by the Ethereum blockchain. The Cryptopaper states that the Shiba project chose to stay decentralized by building their ecosystem on a well-established and secure platform.

SHIB’s Canine Terminology

Continuing with the dog theme, the Shiba Inu woof paper uses canine terms to describe how returns can be generated from one’s Shiba Inu tokens. On ShibaSwap, these tokens can be used for “digging” (providing liquidity), “burying” (stake tokens), and even “fetching” (exchanging one token for another). Tokens used in these strategies generate “Woof” returns in the form of Bone tokens that are distributed to token pools known as “Puppy Pools,” according to the woof paper.

Some cryptocurrency investors are interested in meme coins because they follow different rules than traditional investments. This rebellious approach may also extend to the use of canine terms instead of more conventional phrases like return on investment or liquidity.