The craze or euphoria over meme coins is understandable. Even after its recent drop of more than 50%, CoinGecko points out that the SHIB-USD coin gained by more than 61,800,000% over the last year. Investors continue to seek opportunities in meme coins that can possibly replicate these returns.
Before I talk further about the outlook for the Shiba Inu coin, let me briefly discuss some economic history. And it’s not irrelevant as the cryptocurrency world gets bigger.
The United States witnessed a railroad boom between 1866 and 1873. During this period, 35,000 miles of new track were laid across the country. However, the boom was followed by a crash. By 1876, it’s estimated that 18,000 businesses failed. Most railroad companies went bust. That being said, the United States had a robust railroad infrastructure in place.
There is a similar experience with the technology, media and telecommunication bubble of 2000. Once the bubble went bust, most internet stocks had lost 75% of their value. However, some of the biggest technology giants of 2021 survived the crash.
Simply put, every new technology or idea is followed by euphoria. Once the bubble goes bust, the idea lives and contributes to a better world. However, a majority of companies born during the euphoria fail to survive.
As I write, there are over 11,000 coins listed on CoinGecko. I can say with some conviction that 80% of the coins will go bust in the next five years. The blockchain technology will survive and strong use cases will also survive.
Will the Shiba Inu coin survive? It’s anybody’s guess.
Wider Adoption Is a Silver Lining
Fiat money is simply backed by government trust. Cryptocurrency is backed by community trust. The bigger and stronger the community, the coin has a higher possibility of survival.
From that perspective, there are few positives.
Shiba Inu already has 1 million investors. However, the risk is that top 100 investors own 80.38% of the coin. Any dump by the top investors can result in a sharp correction. It can also be said that the coin is in strong hands.
Recently, a Canada based medical services provider added $1.5 million worth of the SHIB-USD coin to its balance sheet. The company plans to add the coin as a payment option. Similarly, online electronics shop Newegg also started accepting the coin as a payment option.
I believe that the only way for Shiba Inu to survive is wider adoption and wider use as a medium of exchange. It remains to be seen if more companies start accepting SHIB coin as a payment option.
Another point that’s worth noting is that Shiba might be evolving into something that’s more than just a meme coin. As an example, Shiba Swap currently has a total value locked of $412.6 million.
Further, Shiba Swap will allow investors to buy, sell and trade non-fungible tokens. These NFTs are unique and will be only available on the platform.
Shiba has also expanded the ecosystem with Leash (CCC:LEASH-USD) and Bone (CCC:BONE-USD) tokens. When investors provide liquidity on Shiba Swap, they earn Bone tokens. With a limited supply of 250 million tokens, Bone already trades at 8 cents.
The Bottom Line on Shiba Inu
Another point to note is that Shiba Inu coin is deflationary, over time, the total supply will continue to decline. On the other hand, DOGE is inflationary.
Even with the positives, it’s worth noting that the coin still trades at a market capitalization of over $20 billion.
After a big rally in the last 12 months, I would be cautious. DOGE has struggled to regain bullish momentum after trading at all-time highs of over 70 cents.
At best, I would consider some speculative exposure to Shiba Inu. A big plunge might not be a good idea in any meme coin.
On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.