The stunning rise of Shiba Inu (CCC:SHIB-USD) last year made the “to the moon” moves of AMC Entertainment (NYSE:AMC) and GameStop (NYSE:GME) look tame by comparison. Unfortunately, I wouldn’t count on it to be another epic year when it comes to this popular meme token’s performance.
Sure, no one’s expecting Shiba, now with a market capitalization in the billions, to go up another 49 million percent (per numbers from The Motley Fool). But I wouldn’t dive into it with the assumption that it has a shot of delivering solid returns in 2022. Much less, make a run back to its all time high, which is more than double its current trading price.
Why? Like I argued a few weeks back, “pupcoin mania” has come and gone. As that trend is no longer popular, it’s going to be difficult for the mania to return. Investors bullish on this crypto may point to its recent and pending enhancement, as a sign that it could rally on increased utility.
Still, with its efforts to one day give Ethereum (CCC:ETH-USD) and its “Ethereum killers” like Cardano (CCC:ADA-USD) and Solana (CCC:SOL-USD) a run for their virtual money a work in progress? It’s best not to speculate this will happen. Even if you believe crypto at-large is due to bounce back after its recent declines, it’s best to continue skipping out on SHIB-USD. The more serious names remain your better choice.
The Latest With Shiba Inu
So, what’s the latest with this dog-themed crypto? As my InvestorPlace colleague Chris McDonald reported Dec. 31, there was a bit of news that appeared positive for SHIB-USD’s long-term prospects. That would be news of it adopting a decentralized autonomous organization (DAO) structure.
Why is this a big deal? With a DAO structure, holders of Shiba Inu will have the ability to vote on important changes. These include upgrades, as well as other changes that could enhance its long-term value. It’s another step in the right direction for sure. However, it’s still far away from joining the ranks of more developed blockchain ecosystems.
Despite ShibaSwap and other projects, it has a long way to go before its DeFi (decentralized finance) capability becomes high enough that it starts attracting significant interest from DeFi developers. That’s not to say there isn’t the potential for this to happen down the road. Compared to Dogecoin (CCC:DOGE-USD), it’s made a lot more progress in this area.
But buying Shiba Inu today as a bet that progress with improving its functionality will send it soaring is risky, not only because it may fail to make progress in that area. Struggling in recent weeks, the months ahead could prove tough for the crypto market as a whole.
Market Volatility Could Also Hinder a Comeback
In recent weeks, cryptos across-the-board have seen sharp declines. For example, Bitcoin (CCC:BTC-USD) went from hitting a new all-time high in early November ($68,990.90), to trading for around $46,500 today.
The same thing played out with Ethereum, with its slide from around $4,800 on Nov 7, to around $3,800 as of this writing. The other popular altcoins have also experienced double-digit percentage declines in price. Crypto prices have stabilized in recent days, yet another round of big declines may be in the cards for digital assets.
Why? Because the factor driving this (a more hawkish Federal Reserve) isn’t going away anytime soon. The Fed is speeding up its tapering plans. It’s also planning to raise interest rates three times this year. The “easy money” that made investing in speculative assets so profitable in recent years is going away. With this, expect a continued flight to quality. In other words, more pressure applied to the crypto market.
What does this have to do with Shiba Inu? If cryptos remain in bear market mode over the next twelve months, it’s going to be hard for this token to bounce back. Even in the off-chance its developers manage to put in place enhancements faster than expected.
Stick to Better Plays Than SHIB-USD, Even If You’re Less Pessimistic
In closing, I’ll concede that I’m making too much of the crypto market’s recent pullback. Much of its poor performance last month could have been due to tax-loss harvesting. You could also make the argument that the prospect of higher interest rates is already priced into crypto. Both factors may point to digital assets staying stable, or better yet kicking off a recovery.
But is this the best way to play a possible crypto recovery? Not exactly. Names like Ethereum, offering a combination of stability and upside potential, appear to be better vehicles for investors to make a bullish bet on crypto in 2022. Buy them instead, and continue to hold off on buying Shiba Inu.
On the date of publication, Thomas Niel held long positions in Bitcoin and Ethereum. He did not hold any of the other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.