Many holders of Shiba Inu (CCC:SHIB-USD) have been taking profits or cutting their losses recently. But the coming year looks bright for Shiba Inu, as with many alternative “meme” coins.
Shiba Inu cryptocurrency peaked on Oct. 27 at $0.00008841. That’s right — it’s four zeros after the decimal and then 8841. Another way to this value is 0.008841 cents.
However, today, Dec. 6, SHIB is down to around 0.0035 cents. That means the crypto is down 60% from its peak. This is a highly volatile crypto, to say the least.
To the consternation of many of the Shiba Inu adherents, the most recent dip is after Shiba Inu made a major announcement. On Nov. 29, Kraken, a major U.S. crypto exchange, agreed to allow Shiba Inu to trade on its platform.
Kraken will make it easier to buy SHIB with U.S. dollars and euros. This is important since many crypto buyers do not want to go through the process of having to buy another cryptocurrency first to buy Shiba Inu. That is what is required at many other exchanges.
However, astute investors know that Kraken is not the only exchange that allows investors to buy Shiba Inu in US dollars. Back in mid-September Coinbase Global (NASDAQ:COIN) began allowing SHIB tokens to trade on its exchange. This is the largest U.S. crypto exchange and it allows investors to pay for Shiba Inu tokens in U.S. dollars.
So, in a way, the Kraken announcement was not going to be a life-altering event for Shiba Inu investors. In fact, after the token spiked following the Nov. 29 announcement, it later started drifting down again.
Where Things Stand for Shiba Inu
It’s possible that Shiba Inu is slowly drifting down due to tax-related selling. Wash sale rules might soon apply to cryptocurrency, which would incentivize selling cryptocurrency now.
This does not matter so much during the calendar year. But at the end of the year, it becomes a way to “harvest” a short-term or long-term loss for tax purposes. After a 31 day waiting period, investors are free to buy back again and not have to keep the higher tax basis.
This means that if investors assume that the price will not move much at the beginning of January they could get back in at a similar price. The difference is they have harvested a tax loss, which could be offset against other income or gains.
Moreover, this tax-loss selling often occurs at the beginning of December. This is because investors might suspect that after the new year crypto prices will take off again. So they do not want to have to buy in again at a significantly higher price. That pushes them to sell in late November or early December. I think a lot of this is going on now in the crypto market
In addition, it’s possible other investors are taking their profits in Shiba Inu. This allows them to use their losses in other cryptos or stocks.
What To Do With Shiba Inu
Most investors will be better off taking a long-term view. It also still pays to hold your investments — including Shiba Inu and other cryptocurrency — for a 12 month period before taking gains. That is because the long-term capital gains rate is much lower after holding an investment for 12 months.
But, conversely, many investors take their short-term losses as an offset against extraordinary short-term gains. I suspect that this is highly influencing SHIB right now.
After all, anyone who bought SHIB before the beginning of October likely has an extraordinary gain. However, purchases of Shiba Inu after the end of October likely have a loss. That is because it traded over today’s price after Oct. 24.
However, value investors will take advantage of this period of tax-related selling. They are hoping that come the new year there will be a much higher price.
On the date of publication, Mark R. Hake did not hold any position (either directly or indirectly) 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.