When Binance listed Shiba Inu (CCC:SHIB-USD) cryptocurrency to trade on their exchange in early May, the CEO of the exchange tweeted that it was “super high risk.” That is putting it mildly. The price of the currency has been extremely volatile. It is frankly suitable only for the most speculative of traders.
For example, on Aug. 11, the price of the crypto was trading 8.16 10-thousandths of 1 cent. That means it has 5 zeros behind the decimal before the 8.16 figure. This is down from 33.89 10 thousandths of 1 cent at its peak in early May. So it has fallen over 75.8% from its peak (i.e. 8.16 / 33.89-1 = -75.9%).
From a practical standpoint that means its market value, according to CoinMarketcap.com fell from $16.6 billion on May 10 (the peak) to $3.215 billion as of Aug. 11. That is a high-risk swing.
Is Shiba Inu Crypto Worth the Risk?
Shiba Inu crypto is an Ethereum (CCC:ETH-USD)-based meme token launched in August 2020 and is intended as an alternative to Dogecoin (CCC:DOGE-USD). A Shiba Inu is a Japanese term for a similar dog breed as the dog in Dogecoin. The official website, shibatoken.com, says that it is a “decentralized meme token that evolved into a vibrant ecosystem.”
This is the first of a number of dog-themed cryptocurrencies, according to Decrypt.co., including another crypto coin named LEASH and BONE. Apparently, there was 1 quadrillion (1 million billion) SHIB tokens created. The developers sent more than half of the total supply, just over 505 trillion SHIB, to the address of Ethereum co-founder Vitalik Buterin. At the time it was worth $8 billion.
According to Decrypt, the market needs to consider that amount as having been burned. However, on May 13, Buterin donated more than 50 trillion SHIB (worth over $1 billion at the time) to the India Covid-Crypto Relief Fund.
So these SHIB tokens really were not “burned” and since then the market has realized this. The India relief fund likely has been selling those tokens in order to provide real relief assistance. To say the least that is likely one major reason why the cryptocurrency has taken such a tumble. It could also potentially cause the crypto to be quite volatile over the next year.
What to Do With SHIB Tokens
As I have implied, it goes without saying that only the most non-risk averse investors should even consider putting money in SHIB tokens. The only real practical way to do this is to purchase the token on the US Binance exchange or on Uniswap. But only those investors with enough risk tolerance to be able to lose a good portion or all of the investment should take the leap.
And it really is a leap. The token has such a low absolute price that a small change in it can mean a huge percentage change.
My view of this is that the absolute low price is designed to promote the belief that the SHIB token can rise exponentially. The developers could make trading in the token much easier and more transparent by doing a reverse split and dividing each person’s holdings by a set divisor (say 1 million). The price would immediately rise by the same divisor. However, there is no indication that this will ever happen.
So, stay away from SHIB tokens unless you are prepared to ride a huge roller coaster of volatility. That may appeal to some investors, but for most this token is not likely to be a good fit.
On the date of publication, Mark R. Hake held a long position in Ethereum and Dogecoin but did not own any other security mentioned in the article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.
