Shiba Inu Investors Can No Longer Ignore Inflationary Concerns

One of the benefits of trading extremely speculative cryptocurrencies like Shiba Inu (CCC:SHIB-USD) is that in some cases, they can dissociate themselves from the trajectory of the major mainstream digital assets. True, crypto investors always have their eye on the Bitcoin (CCC:BTC-USD) price. But BTC isn’t as relevant to SHIB-USD as it would be for other virtual currencies.

A smiling Shiba Inu dog in front of a bright yellow background.
Source: Shutterstock

Now, I understand that the development team behind Shiba Inu do not want it to be known exclusively as a meme coin. Instead, it has fostered a legitimate digital community focused on its love for the Shiba inu breed, per its whitepaper. Further, with the development of its canine-inspired non-fungible tokens (NFTs), the project is on its way to developing an economic ecosystem, however bizarre its ethos.

Still, let’s deal with reality: the folks who have bought into the Shiba Inu wave probably did so because of the fear of missing out (FOMO). Certainly, many bold risk takers have profited handsomely from the meme-coin phenomenon. And the allure is that, yes, you too can be a Shiba Inu millionaire!

Let me clarify that I don’t mean a millionaire on a per-token basis — that’s easy to do. I’m talking about a millionaire in good old fashioned fiat currencies.

Of course, this narrative has always been super-treacherous for anyone willing to spend more than bottom-of-the-sofa funds would allow. But it’s also fair to say that — extreme risk aside — there’s some rationality behind Shiba Inu.

Primarily, SHIB’s strong vocal community is a distinct if not outright unique phenomenon. Thus, SHIB isn’t always correlated with the Bitcoin price, which has its advantages. Further, it’s more palatable when BTC was trading near $70,000 to take a smaller bet with SHIB than a large one with Bitcoin.

Shiba Inu Can’t Run from Inflation Concerns

While I still believe that the two aforementioned attributes are relevant right now, these issues center on Shiba Inu being at least somewhat independent of Bitcoin’s rumblings. But at the present juncture, perhaps the biggest concern is inflation.

As The New York Times recently reported, consumer prices rose at the fastest pace since 1982. Therefore, many analysts fear that the Federal Reserve will take stronger measures to combat inflation, first by gradually removing monetary support and later with rate hikes. Naturally, this wouldn’t be too helpful for risk-on assets like Shiba Inu.

It’s not that high-flying growth names and cryptos can’t do well in a higher interest rate environment. Rather, this concern stems from economic rationality. Investors have choices given any market backdrop. If monetary and/or fiscal pressures provide better risk-reward balances toward risk-on names, they’ll move their money in that direction. If the opposite is true, they’ll move in the other direction.

To be totally transparent, the Fed isn’t guaranteed to raise rates. The latest jobs report was disappointing, reflecting underappreciated vulnerabilities in our economic recovery. Therefore, the Fed could keep the punch bowl flowing.

But the rate-hiking crowd may have the superior or more convincing argument. According to a Reuters report, the U.S. services industry unexpectedly rose in November. At the same time, supply chain woes have not eased up. In combination, this dynamic theoretically means that, while the jobs number in total may have disappointed, certain employment sectors are ramping up.

Eventually, more sectors may rise due to the buoyancy in the services industry, which will really drive up prices. Again, supply chains remain constricted, yet this has not crimped demand. More workers with more money but in a low-supply environment spells trouble, which suggests the Fed has to raise borrowing costs to cool the fire.

Time to Strategize

While the above bodes poorly for Shiba Inu in the interim, it doesn’t necessarily mean that SHIB-USD investors have to despair. Even the ones taking losses might not be stuck in a permanent crimson sea, so long as they don’t actualize those losses.

Let me be 100% clear: you don’t want to invest more than you can lose with these highly speculative ideas. But it’s well within possibility that — due to SHIB’s remarkably popular community — the token can make a recovery.

When that recovery will occur, though, is anyone’s guess. Again, that’s why you don’t want to invest more than you can lose. Putting all your eggs in this basket could prevent you from advantaging much more reliable investments. Still, mainstream awareness was what was lacking in prior crypto rallies. So, take a moment to see if this discount is right for you.

On the date of publication, Josh Enomoto held a LONG position in BTC. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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