Over the long run, the stock market is a seemingly unsurpassed wealth creator. The S&P 500 has been delivering an average annual total return, including dividends paid, of roughly 10% for decades. But when examined over a much shorter time frame, cryptocurrencies have run circles around Wall Street.
The real-world potential for blockchain-based innovation has helped propel the aggregate value of all digital currencies from a coronavirus low of $141 billion to nearly $1.06 trillion, as of earlier this week. For those of you keeping score at home, this is a staggering 649% increase in value in just a 30-month stretch.
But for highly popular meme cryptocurrency Shiba Inu (SHIB -2.31%), a 649% gain would just be a good day at the office.
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Shiba Inu’s 2021 performance may never be duplicated
What Shiba Inu was able to do in 2021 was nothing short of historic. According to data from CoinMarketCap.com, investors had the opportunity to buy SHIB tokens for just $0.000000000073 at the stroke of midnight on Jan. 1, 2021. Less than 10 months later, on Oct. 27, Shiba Inu would hit its all-time intraday high of $0.00008841 per coin.
For those of you keeping score at home, we’re talking about a trough-to-peak gain of more than 121,000,000% in under 10 months. This means an investment of $1 at the stroke of midnight on Jan. 1, 2021 would have made an investor a millionaire by October 27.
Even though Shiba Inu would lose a sizable percentage of its value in the final two months of the year, it ultimately delivered a gain of around 46,000,000% in 2021. To put into context how incredible of a return this is, the benchmark S&P 500 has gained a stellar 30,209%, including dividends paid, in the 57-year stretch between 1965 and 2021. Shibu Inu tokens returned more than 1,500 times the S&P 500’s 57-year total return in a single year.
But SHIB holders believe even better days lie ahead. With Shiba Inu effectively doubling in value off of its mid-June 2022 lows, chatter is once again building on social media message boards that the psychological price target of $0.001 could be in play — perhaps within the next two years.
What would need to happen for SHIB tokens to rocket nearly 7,800% higher by 2024? Let’s have a closer look.
What would need to happen for Shiba Inu to reach $0.001?
In order for Shiba Inu to deliver some form of repeat performance to 2021, three things would need to go its way.
Arguably, the most important catalyst for SHIB is the expected launch of Shibarium, an internally developed layer-2 blockchain that’s specifically designed to lower transaction costs. Not only would lower transaction costs make SHIB more appealing from a merchant standpoint, but it would, more importantly, fuel non-fungible token (NFT)-based gaming and NFT marketplace transactions. Shiba Inu’s metaverse ambitions are dependent on lowering transaction costs.
Despite rumors that Shibarium would make its debut sometime during the third quarter, Shiba Inu’s developers have noted that no definitive timetable has been placed on a public beta launch.
The second core catalyst that would be necessary to generate a nearly 7,800% return by 2024 is coin burn (and lots of it!). Coin burn is a lot like a stock-buyback program, but for cryptocurrencies.
When a publicly traded company repurchases its own shares, it makes each remaining share that much more valuable. The same idea applies with coin burn. By sending tokens to dead (i.e., inaccessible) blockchain addresses, the remaining supply of tokens is reduced.
Last year, Ethereum founder Vitalik Buterin played a key role in fueling Shiba Inu’s run higher. After being gifted roughly half of SHIB’s 1 quadrillion token supply, Buterin sent more than 410 trillion tokens to a dead blockchain address. With a single click, Buterin reduced SHIB’s outstanding coin supply by 41%.
Last but not least, Shiba Inu is going to need even more social media buzz than it had during its monumental run-up in 2021. According to Etherscan, there are 1.22 million individual wallets holding SHIB tokens, as of Sept. 12, 2022. To hit $0.001, this ultra-popular meme coin would need these folks out in full force to create buzz on social media.
Image source: Getty Images.
Here’s why Shiba Inu is all bark and no bite
Now that we’ve taken a closer look at what catalysts would be necessary to send Shiba Inu markedly higher, let’s tackle the obvious question: Is $0.001 a realistic target by 2024?
While SHIB has previously done what was believed to be impossible, I don’t see any way it comes close to hitting $0.001 in the next two years. In reality, SHIB looks to be all bark and no bite.
One of the biggest issues with the chatter surrounding SHIB hitting $0.001 is that it would imply a valuation of more than $500 billion. Only a few publicly traded companies sport higher market caps. However, those companies are generating tens of billions of dollars in annual operating cash flow and have led with innovation. Neither of these statements would apply to Shiba Inu.
To build on this point, Shiba Inu offers no competitive advantages or true differentiation in the highly competitive cryptocurrency space. As an ERC-20 token built on the Ethereum network, Shiba Inu is nothing more than a hyped payment coin — and there’s nothing particularly special about using digital currency as a form of payment.
What might be even more shocking is what little use SHIB is seeing as a real-world form of payment. According to online business directory Cryptwerk, only around 500 mostly obscure global merchants are willing to accept SHIB, excluding crypto services. Further, this figure hasn’t changed in over three months, which signifies the unwillingness of merchants to accept a digital token that’s already declined by as much as 91% from its all-time high.
To make matters worse, virtually all payment coins that have generated life-altering gains in a short time frame went on to lose almost all of their value in the two years following their eventual peak. In other words, even though SHIB has lost as much as 91% of its value since its Oct. 27, 2021 high, there’s nothing that prevents it from retracing 99%+.
Finally, with an estimated 549 trillion SHIB tokens still in circulation, according to CoinMarketCap.com, there doesn’t appear to be anywhere near enough coin-burn momentum to make a justifiable difference in Shiba Inu’s price per token.
The psychological target of $0.001 might be fun to talk about on social media, but it’s not a realistic expectation for a project devoid of competitive advantages and with a lot to prove.
