Shiba Inu (CCC:SHIB-USD) has had a rough time in the last several months. It peaked at $0.00008719 on Oct. 27, or 0.87 10 thousandths of one dollar. Today, Dec. 18 it’s trading for 0.3135 10 thousandths of one dollar. Another way to say this is that SHIB-USD is now at 31.35 10 thousandths of one cent, down from 87 10 thousandths. That essentially means it has dropped 64% in less than two months.
That is a pretty dramatic move and likely reflects a large amount of tax-related selling at the end of the year. Many people may be planning on harvesting tax losses before the end of the year and this could have led to much of the selling.
This is especially so in the past month. For example, SHIB-USD was at a recent peak of 52.8 10 thousandths of one cent on Nov. 30. So just in the last 18 days, it has dropped from 52.8 to 31.35 (10 thousandths of one cent), or down 40.6%.
That dramatic drop in Shiba Inu is almost for sure likely due to year-end selling for tax purposes. Once the new year begins, the downward pressure from tax-related selling should go away and this could lead to a major rebound in the crypto’s price.
Historical Examples
The only problem with this theory, of course, is that it is not tested. Shiba Inu simply has not been around with major gains like it has had this year for long enough.
For example, a year ago SHIB-USD was much lower than it is today. It was essentially not trading at the time. In fact, for all intents and purposes, everyone who bought Shiba Inu before Oct. 21 has a profit. But virtually everyone who bought after Oct. 21 and has held on now has an unrealized loss of some sort. A good many of these people are selling now.
However, we can look at Bitcoin (CCC:BTC-USD) and Ethereum (CCC:ETH-USD) for similar historical examples at the end of last year.
For example, last year Bitcoin peaked on Nov. 30, 2020, at $19,625 and later dropped to a trough of $18,264 on Dec. 10, 2020. After that BTC-USD took off and started climbing through Jan. 7, after which it consolidated. However, the year-end selling in December last year was likely due to profit-taking, rather than loss-harvesting.
The latter is what I think is going on with Shiba Inu.
Loss harvesting tends to be more sticky and more people feel more compelled to sell to use their losses to offset other capital gains.
The Same Thing Happened With Ethereum
The same pattern occurred last year with Ethereum. For example, a year ago on Dec. 18, 2020, ETH-USD peaked at $659.30, and later by Dec. 22, it had dropped to $583.71. That represents a drop of 11.5% in a few short days before the end of the year.
It probably felt similar to today that the selling was going to continue ad infinitum. Of course, it didn’t, and today, one year later ETH-USD is at $3,968, or almost 6.8 times the price a year earlier.
By the way, Ethereum is now well off of its highs earlier last month when it peaked at $4,812 on Nov. 7. It’s now down 17.5% down at $3,868 from its peak. This is not the same as the 40% drop that Shiba Inu has taken.
What To Do With Shiba Inu
But that might be expected, given that Shiba Inu has a market cap of $17.25 billion, vs. the $470 billion market cap with Ethereum. In other words, the smaller (in a relative sense) digital currency will tend to have higher volatility, so this greater drop is not out of the ordinary.
Of course, that works on the upside as well. Investors in Shiba Inu now should expect to make a much higher return on investment (ROI) than those in Ethereum over the next year.
On the date of publication, Mark Hake did not hold (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.
Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.
