Looking back to the beginning of the 20th century, there was no asset class more consistent in building wealth for investors than the stock market. Although stocks are suffering from their down years, the average annual return of stocks easily outweighs the likes of gold, oil, housing and bonds over the very long term.
But in recent years, cryptocurrencies have invaded the broader market several times. While The Big Two, Bitcoin (CRYPTO: BTC) And Ethereum, often get all the glory, the post now belongs to the meme coin Shiba Inu (CRYPTO: gray hair).
Shiba Inu has made life-changing gains in just over a year
Taking into account the daily price of $0.00008841 on October 27, SHIB tokens have risen 17.335.194% since their debut 15 months ago. In other words, a $10 investment in SHIB on its first trading day (August 1, 2020) would be worth $1.73 million, as of this intraday price on Oct 27.
How does the mysterious token rise over 17,300,000% in just over a year? The stimuli, listed in no particular order, are divided as follows:
- The launch of the decentralized exchange, ShibaSwap, in July, allows coin holders. By doing so, it encourages investors to hold their investment for a longer period of time.
- With the increase in popularity and prices of Shiba Inu, the number of cryptocurrency exchanges that allow trading on their platforms has increased. More SHIB listings mean a larger community and greater brand recognition.
- Billionaire Elon Musk also deserves recognition. Although Musk does not have SHIB in his crypto wallet, he recently adopted a Shiba Inu dog named Floki. Anytime Musk tweets about his dog or posts a meme featuring the Shiba Inu dog breed, SHIB investors take it as a signal to raise the price.
- The lack of ways to bet against most cryptocurrencies that don’t bear the name Bitcoin or Ethereum has led to a buying bias. With few derivatives available and minimal access to short selling on many cryptocurrency exchanges, buyers were in control of the supply.
Of course, the big question is “What’s next for SHIB?”
The answer, if history has a word, is a sharp haircut.
History indicates that SHIB is in big trouble
The fact of the matter is that nothing is guaranteed in the world of investing – and that goes for cryptocurrencies. But more often than not, history rhymes. This means that history can provide clues as to what could happen next with stocks, or in this case a very popular cryptocurrency.
When I looked at the other thrust-focused coins that had previously enjoyed the upward moves of the monsters, a clear trend emerged. Within a relatively short period of time, they had all lost more than 90% of their value.
for example, XRP (CRYPTO: XRP)The token, previously referred to as Ripple, ran from less than a penny ($0.0054) on March 1, 2017, to $3.3778 as its closing price on January 7, 2018. This represents a 62,452% increase in 10 months and a week. After that, everything collapsed for the momentum-driven XRP. Between profit taking and legal issues, the XRP token returned to $0.1396 on March 12, 2020. In just over 26 months, XRP has given up 96% of its value. And she is far from alone.
Litecoin (CRYPTO: LTC)Long considered a copy of silver under the bitcoin gold standard, the fire has been burning for 30 months. Between May 18, 2015 and December 18, 2017, the value of Litecoin tokens increased by 24,613%. For some context, it took the standard Standard & Poor’s 500 About 55 years to earn a similar amount. But by December 14, 2018 (1 year later), LTC tokens can be amassed 93% below their maximum close.
Even nano (CRYPTO: nano)One of my favorite cryptocurrencies, I’ve had similar struggles. On March 10, 2017, cryptocurrency investors could get Nano Tokens for $0.0073 (less than a penny!). By January 2, 2018, they were going for $33.7023. This represents an increase of 461,575% in less than 10 months. But by March 16, 2020, Nano once again found itself at $0.3527 per token, representing a 99% loss from its all-time high.
To add, Bitcoin has also had its fair share of declines of 80% over the past decade.
History is quite clear that a life-altering uptrend in a short time frame is almost impossible to hold onto. If history repeats or repeats, SHIB tokens will lose at least 90% in the coming weeks, months and possibly years.
But wait there is more
Then again, history isn’t the only problem the Shiba Inu faces.
As I mentioned earlier, the SHIB token is only accepted by nearly 100 online mystery merchants, according to the Cryptwerk Online Business Directory. Despite making its way into the top 10 cryptocurrencies by market cap, Shiba Inu has almost no use outside of a cryptocurrency exchange.
Equally annoying, the cryptocurrency exchange and ecosystem Queen Piece He indicated on October 29 that the average wait time for SHIB on its platform was (drum roll) just 11 days. What this tells us is that Shiba Inu trading is mostly based on emotion or momentum, as few of its investors actually believe in the long-term payment potential of SHIB. Presumably, this leaves the price of the Shiba Inu token open to extreme fluctuations.
And perhaps most problematic of all is that Shiba Inu does not offer any competitive advantages. To get a true shot of long-term use, the Shiba Inu will need to stand out in some way. However, processing time, network capacity, and transaction fees aren’t something to write home about.
It is impossible to predict precisely when SHIB’s momentum will fade. But with history as our guide, it is practically recognized that this massive increase will not continue.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.