I have written two articles about Shiba Inu (CCC:SHIB-USD) and none of them was supportive. This is the third article, and my investment thesis on this meme cryptocurrency remains the same. I consider it a bubble ready to burst anytime. My first article “Shiba Inu: Another Altcoin to Avoid By All Means” criticized the whitepaper and the logic in investing in Shiba Inu only for fun.
In my second article, “ Shiba Inu Fans Are Falling Prey to Cognitive Biases,” I referred to biases investors have when investing in assets. I am not a supporter of cryptocurrency at all. Here are my five arguments that the future of Shiba Inu is worrisome.
A Pointless Meme Crypto Brand
Shiba Inu has witnessed a staggering rally in 2021 with returns that seem science fiction to prudent and conservative investors. Consider that there are roughly 13,000 cryptocurrencies in the world and new ones appear every week. What is the competitive advantage or the economic moat of Shiba Inu?
With creating a strong social media presence, does Shiba Inu have any technological advantage? It does not. The long-term path of its success relies solely on the strength of its brand. But what I consider a huge business mistake for Shiba Inu is that its creators got carried away with a supply of 1 quadrillion coins, as this coin was made for fun.
So this massive supply is seriously limiting potential price appreciation. My opinion is that the real intrinsic value of Shiba Inu is $0.
Ultimately, supply and demand will drive the price of SHIB. But from a brand perspective, creating a series of nonfungible tokens called (NFT) “shiboshis” and hoping that investors will rush in buying them and trade them — is just another way of trying to create value out of nothing.
Risk of High Concentration
Shiba Inu is a highly concentrated coin and is subject to manipulation. According to FXStreet,
“Shiba Inu ownership concentration came under scrutiny. A total of 872,382 wallets control 72% of SHIB, according to data from Coinmarketcap.com. The biggest whale wallet holds nearly 41% of SHIB; the second-largest wallet holds 34% of SHIB’s circulating supply.”
The article also mentions that, “Traders are tracking movements of a SHIB “whale” wallet that controls over 13% of the circulating supply of the Dogecoin killer.”
These whales are investors with a significant concentration of the Shiba Inu coin. It means that at any point they can manipulate the price of this meme coin.
Investing in a highly concentrated asset is too risky. Why? You are vulnerable to the big whales trying to set prices, and this is against the fundamental law of integrity in all capital markets.
Do you want to invest in a coin that can be easily manipulated? Be very aware of this. The extreme volatility of the entire cryptocurrency market is not suitable for investors with a risk-averse investment philosophy. Shiba-Inu is no exception.
Lack of Real-World Utility
At present, the token currently has no real-world utility as a means of exchange and you cannot use your SHIB on physical goods or services.
Even if AMC decides to accept Shiba Inu as payment, it will be limited. It is not capable of establishing this meme coin as something with the wide acceptance of having a utility.
The story with squid game crypto scam should be another red flag to investors in the cryptocurrency market. Binance is investigating, according to a spokesperson.
“These types of scam projects have become all too common in the DeFi space as speculative crypto investors seeking the next ‘moon shot’ are quick to invest in projects without doing the appropriate due diligence,” the spokesperson said. “Speculators seeking potentially unrealistic, high-risk ‘lambo’ or ‘moon shot’ opportunities should be wary of the risks of investing in new or unverified assets, whether in crypto or the securities markets.”
Fans of cryptocurrency market should never forget that they have to deal with a decentralized market — meaning too many unexpected things can occur at any time. And these things most of the time are not good for the investors. Asset, compliance, regulatory risks are major risks for DeFi.
FUD and FOMO Will End Soon
In investing and trading, the concepts of FUD (fear, uncertainty, doubt) and FOMO (fear of missing out) do not last forever. I argue that there is a time limit to this euphoria related to the price of Shiba Inu, which is getting narrower.
With no key catalysts to drive Shiba Inu price higher, technical analysis may shift from buy to sell with volatile price swings occurring to Shiba Inu. Investing in something fun with zero value is not sustainable. Emotional trading cannot last forever. It is a matter of when, not if, logic will return to the markets.
Avoid emotional trading or investing in Shiba Inu. There is an asymmetrical risk-reward.
On the date of publication, Stavros Georgiadis, CFA did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at thestockmarketontheinternet.com/. He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.