2 Things Shiba Inu Investors Could Learn From Dogecoin’s Collapse


The stock market is an exciting place filled with innovative companies reshaping our future. History shows that a long-term approach to the market yields the best returns, evidenced by the 3,700% rise in the broad S&P 500 index over the last 40 years.

But this pales in comparison to the neck-breaking returns in some cryptocurrencies over the last 12 months alone, including a meteoric eight-figure percentage rise in meme-token Shiba Inu (CRYPTO:SHIB).

Regular investors in cryptocurrencies will recall a similar “moonshot” in longtime favorite Dogecoin (CRYPTO:DOGE), but that token is now down over 60% from its all-time high. Shiba Inu could face a similar fate, and investors should pay close attention to these two key similarities.

IMAGE SOURCE: GETTY IMAGES

1. Market capitalization (valuation) beats price

One of the arguments for owning Dogecoin in early 2021 was that it traded at just $0.20, and if it became the next Bitcoin (CRYPTO:BTC) and rose above $60,000 eventually, it could be a real millionaire-maker for small-time investors.

But any investors who followed this line of thinking failed to account for the fact that it was almost mathematically impossible for Dogecoin to rise in price to match Bitcoin. That’s because there’s a far greater supply of Dogecoin than Bitcoin, and there are, in fact, significantly more Shiba Inu tokens than both of them.

Cryptocurrency

Current Price

Current Total Supply

Market Capitalization

Bitcoin

$65,427

18.9 million Bitcoin

$1.23 trillion

Dogecoin

$0.272678

132.0 billion Dogecoin

$36.0 billion

Shiba Inu

$0.00005429

549.2 trillion Shiba Inu

$30.3 billion

DATA SOURCE: COINDESK, COINGECKO.

There are a whopping 549 trillion Shiba Inu tokens in supply at the moment, which is why the cumulative value of all the tokens is over $30 billion, despite its tiny price of $0.000054.

Put simply, Shiba’s price would need to rise more than 5,000-fold to match Dogecoin in price.

But that would mean its $30.3 billion market capitalization would also need to rise an equal amount, which would give it a total value of approximately $152 trillion — the equivalent of a third of all wealth on the planet.

If it sounds ridiculous, that’s because it is. Remember, for all of Dogecoin’s promise, it’s still meandering around $0.27 per token, which is a long way from Bitcoin prices. The math around its valuation compared to Bitcoin is similar to the above example and a key reason why.

A frustrated investor resting their head on their arms at their desk, in front of stock charts on computer monitors.

IMAGE SOURCE: GETTY IMAGES

2. A lack of adoption will erode Shiba Inu’s gains

Many social media personalities, including Tesla Motors CEO Elon Musk, often participated in the Dogecoin debate, sometimes sending the price soaring. But when it came time for Dogecoin to prove its worth as an actual currency, its case fell apart.

To this day, an estimated 1,930 merchants globally accept Dogecoin as payment, and they’re mostly obscure businesses. It’s hardly enough to warrant widespread consumer adoption, and if people aren’t transacting with it, then it’s nothing more than a speculative token with no utility.

By comparison, just 110 merchants currently accept Shiba Inu as payment, and over 40% of those are crypto-related services businesses. Daily transactions don’t lean in Shiba Inu’s favor, either. In the last 24 hours, there were 34,000 transactions in the token, compared to Bitcoin — the benchmark — at 235,000. In other words, consumers probably won’t be spending Shiba Inu at their local shopping mall any time soon.

Not only is Shiba Inu strikingly similar to Dogecoin, but it might actually be worse by adoption-related metrics.

For investors who are considering buying Shiba Inu, there are better alternatives. The financial sector is constantly welcoming new, innovative payment companies, and many of them run circles around most cryptocurrencies in terms of consumer adoption. Plus, some have the added benefit of billions of dollars in revenue and earnings.

Over the long run, you might wish you bought them instead.

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.





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