If you take 3 dollars and use it to buy cryptocurrency Shiba Inu (CRYPTO: gray hair) On January 1st of this year, you had over $1.29 million today — assuming you kept. This is a huge return of 43,000,000%.
However, the meme code is down 62% from its all-time high, while your $3 would have reached $3.4 million.
It truly is a lifetime return that even the most seasoned investor doesn’t see. In comparison, if you buy shares in an e-commerce giant Amazon When it was publicly listed in 1997 and held, you would have earned a return of 195,900% to date. Not only does it get a fraction of the Shiba Inu back, but it would take 24 years compared to just 12 months for the token.
But investors reading this now may be wondering if the current drop in the Shiba Inu price is a buying opportunity and, of course, whether there is a chance of achieving the same huge returns we saw earlier.
Dogecoin offers some perspective
Dogecoin (CRYPTO: DOGE) It is often considered the original meme icon. His price and fame have skyrocketed, thanks to some of the most famous personalities on social media in the world who have promoted him. Perhaps one of the most famous defenders is Tesla Motors (NASDAQ: TSLA) CEO Elon Musk, who led her into the mainstream with a guest appearance on Saturday Night Live.
Over the past 12 months, Dogecoin has been trading from a low of $0.0031 to $0.74, which is a 23,300% increase in price. Although this is relatively easy when compared to Shiba Inu, both tokens are now trading at similar market capitalizations (the total value of all the tokens traded multiplied by the price). Shiba Inu has a net worth of $18.6 billion, while Dogecoin has a net worth of $24 billion.
Since it reached an all-time high of $0.74, Dogecoin has trended steadily lower, settling near $0.18 today. This is a sharp drop of 75%, so investors who bought the tokens near the high levels suffer significant losses. To make matters worse, he never seemed to get his best form back.
But earlier this week, Musk announced that Tesla would begin accepting Dogecoin for certain items of merchandise, sending the price up nearly 40% before phasing out. This action sums up a huge problem that Dogecoin and Shiba Inu have in common: only a few companies accept these tokens as payment for goods and services, so consumers have no reason to adopt them. Therefore, price increases tend to be unsustainable.
Traders have minimal appetite for cryptocurrencies
Cryptocurrencies have generally been touted as a potential alternative to regular currencies, but so far the evidence suggests that they are mostly just tools for speculation instead. Moreover, its highly volatile nature makes it a poor store of value; Will the average consumer entrust their value to tokens like Dogecoin and Shiba Inu, which have dropped in value by as much as 75% in a matter of months?
Likewise, it would be difficult for a company to justify accepting such tokens as payment because a rapid decline in value could erode their profits from actually selling goods and services. And based on the leading merchant guide, there are 1,974 mostly anonymous companies willing to take Dogecoin as payment. Even fewer of these accept Shiba Inu – only 387 – and about 15% of these merchants sell crypto-related services.
Thus, Shiba Inu’s recovery hinges on the willingness of new investors to come in and pay incrementally higher prices for the token, based on the lack of real underlying drivers. Unfortunately, the history of Dogecoin indicates that there is likely to be no widespread adoption of Shiba Inu (even at a speculative level). That’s why the token will find it nearly impossible to get the mainstream fame it needs to gain a high value.
That is why Shiba Inu will likely never recover from this crash, and investors should pay close attention to the lessons learned in the past meme-token craze, which mostly ended in a spectacular crash.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.