Last year, the widely followed S&P 500 more than doubled up its average annual total return over the past 40 years, as well as hit nearly six-dozen record-closing highs. And yet, the stock market still took a back seat to the outperformance of cryptocurrencies.
As of very early morning Dec. 29, the aggregate value of all cryptocurrencies was $2.26 trillion. In one year, the crypto market nearly tripled in value. Although the usual suspects, Bitcoin and Ethereum, were responsible for a large portion of this increase — they make up approximately 60% of the $2.26 trillion value — one coin stood head and shoulders above all others: Shiba Inu (CRYPTO:SHIB).
Shiba Inu’s 2021 was historic
While the cryptocurrency space has yielded some jaw-dropping short-term gains before, we’ve never seen anything like what meme coin Shiba Inu produced in 2021.
According to CoinMarketCap.com, investors had the opportunity to pick up SHIB for $0.000000000073 per token at midnight on Jan. 1, 2021. Over the course of the next 12 months, SHIB ate up six zeroes and was going for closer to $0.000036, as of Dec. 29. All told, we’re talking about a single-year gain of roughly 49,000,000%!
To put this into some perspective, if someone bought $2.05 worth of SHIB at midnight on Jan. 1, 2021, and we assume there were no transaction fees, they’d be a millionaire at its current per-token price. Comparatively, it’s exceptionally rare to see single-year gains top 10,000% in the stock market, and equally rare for cryptocurrencies to deliver seven-digit single-year returns. I can recall privacy coin Verge managed this feat in 2017 (a gain of almost 1,200,000%), but haven’t seen any prominent coins come close since.
How, exactly, does an asset appreciate by 49,000,000% in one year? Let’s take a closer look.
Dissecting SHIB’s 49,000,000% moonshot
The most obvious reason Shiba Inu proved unstoppable for most of 2021 was its increased visibility. As SHIB rose the ranks in both popularity and market cap, more crypto exchanges welcomed it for listing. Having more exchanges to trade SHIB has meant improved liquidity and a large base of holders. According to Etherscan, Shiba Inu has 1.1 million individual holders.
The launch of decentralized exchange ShibaSwap in July has been a key catalyst as well. Aside from also improving liquidity on a previously illiquid token, ShibaSwap provides the opportunity for SHIB holders to stake their coins and earn passive income. The point being that ShibaSwap has encouraged investors to hang onto their SHIB for a considerably longer period of time.
Enthusiasts are also excited about examples of SHIB’s real-world adoption. Movie theater chain AMC Entertainment plans to roll out Shiba Inu coin as an accepted form of online payment in the first quarter, while tech-focused online retailer Newegg Commerce gave SHIB the green light in December.
To add to this point, there’s excitement surrounding the expected launch of layer-2 blockchain project Shibarium in 2022, as well as the ongoing development of non-fungible token (NFT)-driven gaming.
Additionally, no tale of Shiba Inu’s success would be complete without alluding to the fear of missing out (FOMO). After watching Bitcoin skyrocket higher by as much as 8,000,000,000% in 11 years, crypto investors aren’t afraid of digital currencies running into an unforeseen ceiling. These inelastic buying habits have been pivotal in eliminating six zeroes from its token price.
The $64,000 question: Is Shiba Inu still a buy?
But the most pertinent question after a 49,000,000% gain in one year has to be, is Shiba Inu still worth buying? The answer, very plainly, is no.
Although patient investors have been rewarded with life-altering gains, there are three very good reasons why Shiba Inu should be actively avoided in 2022 (and beyond).
The most important reason investors should keep their distance is Shiba Inu’s lack of competitive advantages and differentiation.
According to CoinMarketCap.com, there are more than 16,100 digital currencies now listed, with hundreds of new coins debuting each week. Standing out in the crypto space is becoming increasingly difficult. Shiba Inu is currently nothing more than an ERC-20 token built on the Ethereum blockchain. It’s subject to the same transaction lag and high fees that continually plague the popular Ethereum network. In other words, other payment coin projects are continually out-innovating Shiba Inu and providing little reason for merchants to accept SHIB as a form of payment.
This leads to the second reason to avoid Shiba Inu in 2022: a lack of real-world utility. In one sense, you could say SHIB’s utility soared last year; but that would be expected when only a few dozen merchants willingly accept your coin. Online business directory Cryptwerk shows that only 395 global merchants accept SHIB as a form of payment. What’s more, 44 of these 395 merchants are nothing more than cryptocurrency exchanges. This means 350 most obscure online businesses in a world with over 500 million entrepreneurs accepts SHIB as payment. That’s a fraction of a fraction, and certainly not worth $20 billion in market value.
History provides the third reason Shiba Inu is a terrible investment in 2022. Virtually every payment coins that gained 24,000% or more in a short time frame went on to lose between 93% and 99% in the 12 to 26 months following their peak. Shiba Inu has already fallen by 60% from its Oct. 27 intra-day high, and history would suggest it has a lot further to fall after gaining 49,000,000% in just 12 months.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.