Shiba Inu (CCC:SHIB-INU), the meme coin and sort of alter-ego to Dogecoin (CCC:DOGE-USD) has been kicked to the curb and seemingly left there. But it is not dead. For example, SHIB crypto still has a market value of $11.8 billion as of Jan. 24, according to Coinmarketcap.com. This is despite the huge selloff today in crypto assets.
As of the close of the stock market on Monday, Jan. 24, SHIB crypto has dropped to $0.0000215 per token. That is much lower than its price at the end of December 2021, when it closed at $0.00003366.
That implies that SHIB crypto has fallen 36% so far this year in 2022. Moreover, this is after the token had a huge performance during Q4.
For example, during Q4 SHIB crypto rose from $0.000007699 to $0.00003366. That means its price at Q4 end was 4.37 times the price on Sept. 30. This is a return of 337% during the quarter.
Why Shiba Inu Is Falling
First, it seems natural that there has been some profit-taking in SHIB crypto. This is because many investors already have huge unrealized gains in SHIB crypto.
However, a second reason for the huge drop seems to be the “FUD” factor (fear, uncertainty and doubt). Given impending Federal Reserve rate rises, a possible Russian invasion of Ukraine and the huge selloff in stocks and major cryptos, the fear factor has hit SHIB crypto trading.
And this last point is very important. If Bitcoin (CCC:BTC-USD) can lose 23% between the end of December 2021 to Jan. 24, how much more will Shiba Inu lose?
In other words, those dumping their BTC crypto will also dump their SHIB crypto. This is especially the case if they are desperate to preserve some of their asset values.
Correlation and Leverage With Bitcoin
For example, Cryptoslate.com has a table showing that there is a 98% correlation factor now with Bitcoin. Bitcoin is down 23% year-to-date (YTD) and SHIB crypto is down 36% YTD.
Given that Shiba Inu coin tokens are much less liquid and it is a much smaller market cap compared to Bitcoin, its leveraged performance is not unusual. And don’t forget this leverage effect will work on the upside as well. If Bitcoin rises by the end of Q1 2022, expect to see SHIB crypto move up dramatically more.
In fact, some rumors have started recently Robinhood (NASDAQ:HOOD) is getting close to accepting SHIB crypto as an approved coin to trade. Once that actually occurs, you can expect to see SHIB crypto take off. This true when you consider that even the rumor of this on Jan. 14 led to SHIB crypto rising 30% in one day.
What to Do With SHIB Crypto Today
Some are feeling the pressure now to sell off their Shiba Inu assets (assuming they still have a reasonable profit in them). This is because they see others selling off their holdings taking their unrealized profits and making them into realized profits
But investors should try to turn away from this urge. If their situation is such that they need the cash, they shouldn’t have been in this risky crypto.
By contrast, it is much better to take advantage of these downswings to buy more SHIB crypto tokens. This will have the effect of lowering the overall average cost for the investment in Shiba Inu.
That also helps investors avoid paying short-term income taxes. The IRS requires a 12-month holding period in order to pay the lower long-term capital gains taxes. I suspect that most people who’ve invested already in Shiba Inu have held it for less than one year. Therefore, averaging down into the crypto at these prices will force investors to take a longer view of the crypto.
On the date of publication, Mark R. Hake did not hold any position (either directly or indirectly) 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.