Down more than 20% in the past week, the big drop continues for Shiba Inu (CCC:SHIB-USD). Its decline in price is in line with price declines being seen across-the-board with cryptocurrencies.
As of this writing, Bitcoin (CCC:BTC-USD) is at around $37,362, more than 51% below its all-time high. Ethereum (CCC:ETH-USD) could be on its way back to below $2,000 per coin. “Ethereum killer” altcoins, like Cardano (CCC:ADA-USD) and Solana (CCC:SOL-USD) have seen even more dramatic drops in recent days.
Many may be scooping them up as the fall, betting that the bottom is near. But it continues to appear that the Federal Reserve will have to take an even sharper move to hawkishness when it comes to interest rates. We may still be far away from a bottoming out moment. In the meantime, digital assets stand to give back more of their respective 2021 gains.
Add in the fact that “pupcoin mania,” which sent SHIB, along with its forebear Dogecoin (CCC:DOGE-USD) “to the moon” doesn’t appear likely to return? If you’re a long-term crypto bull, there may be some logic in buying the higher utility coins mentioned above. Even if they have room to drop further. Yet in the case of this token, where high functionality remains a work-in-progress? It’s best to steer clear.
Shiba Inu and the Crypto Bear Market
Over the past few weeks, even crypto aficionados have had to admit the space has been in bear market mode. Worse yet, while before it was reasonable to assume the downturn was on the verge of wrapping up, commentators and investors are increasingly coming to the conclusion that it’s just warming up.
Why? The main factor driving it (higher interest rates driving a shift to “risk-off”) could get worse before it gets better. If the Fed raises rates more than previously anticipated (three rate hikes of 0.25% each), the market could further readjust the prices of riskier assets.
If that’s not bad enough, regulatory scrutiny of crypto may be set to continue ratcheting up. As early as next month, President Joe Biden’s administration may release a crypto-related executive order. This could be the beginning of the end for the crypto space’s status as a “wild west” asset class. Tougher rules from U.S. regulatory agencies could also make it difficult for this market to bounce back.
As crypto stays under pressure, it will be tough for Shiba Inu to reverse its current downward trajectory.
Upside Potential Continues to Hinge SHIB-USD
If the crypto market keeps on moving lower, expect another slide for SHIB-USD. It may not fall completely back to its pre-meme prices. But another high double-digit percentage move lower, down to what it traded for before its last wave of frenzy last fall, could happen.
It would be one thing if the high downside risk with Shiba Inu was countered by high upside. Alas, that’s not the case at present. Mainly, because despite the small steps its developers have taken to make it a higher-utility token, this crypto has a ways to go before it becomes more than a speculative vehicle. Until then? Chances the only thing that will send it soaring again is a return of the speculative frenzy that sent it soaring in the first place.
The chances of this happening appear slim. Even before the specter of rate hikes began to take a toll on crypto prices, “pupcoin mania,” which helped Doge and Shiba become some of the valuable cryptocurrencies by market capitalization, had already peaked. The “metacoin” bubble took its place as the main type of “memecoin.”
Also, with both names already pushed to multi-billion dollar valuations? As a larger size makes it harder to make outsized moves, traders looking for crypto moonshot will likely opt instead for plays that have yet to have their own “to the moon” moments.
Despite all the warning bells that the crypto bubble is in the midst of deflating, I can see why some may be looking to buy when the market in general is looking to sell. If you believe that crypto has use cases that go beyond just being a trading vehicle? Falling out of favor, now may be a good time to buy high-quality cryptos on sale.
Unfortunately, much like the case with Dogecoin, Shiba isn’t one of them. Like the coin that inspired it, why buy low-utility SHIB, when higher utility coins like ADA or SOL have a greater chance of making big price recoveries if the crypto market maelstrom reverses?
With ample reason to avoid/sell, and little to no reason to buy, the answer’s clear what the verdict is for now with Shiba Inu.
On the date of publication, Thomas Niel held long positions in Bitcoin and Ethereum. 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.