- Shiba Inu (SHIB-USD) is having a really rough year. Year-to-date (YTD), as of May 17, the crypto has fallen over 63%. In fact, since it peaked as of Oct. 26, 2022, Shiba Inu is down from $0.000080 to $0.00001253, a drop of over 84%.
- As a meme stock, expect to see Shiba Inu tread water until similar cryptos like Dogecoin (DOGE-USD) make a rebound.
- Only the most speculative of investors should consider buying Shiba Inu, even though the crypto is on its knees.
Shiba Inu (SHIB-USD) seems to be cheap in that it is priced with 4 zeros to the right of the decimal. This ends up giving the owners a large number of SHIB tokens. For example, for $100, you get almost eight million SHIB crypto tokens.
Sometimes that leads people into thinking they are getting a real bargain, but the opposite is often the truth. They end up buying too many tokens. They surmise that the crypto will rise to $1 someday, making them a multi-millionaire.
The problem with that is the law of large numbers. For example, right now at $0.0001253, Shiba Inu has a market capitalization of $6.876 billion, according to Coinmarketcap.com. So, since it would be a 79,808 times gain for the SHIB crypto to rise to $1, that would mean its market value would be $548.759 trillion. This, of course, is not possible, since that is greater than all the market value of cryptos together.
The point is that this crypto is not necessarily all that cheap even though it is down over 84% to $0.00001253 per SHIB token today.
Where This Leaves Investors in Shiba Inu
SHIB is a highly speculative “meme stock” crypto, which is likely to have a volatile performance over the next year. Moreover, as I have pointed out in a prior article, its performance is likely to react along with, i.e., correlate with, Dogecoin.
This means that investors should expect to have a rough ride if they buy into Shiba Inu now. Despite the fact that it is down over 63% YTD, it still has a very large market cap. For example, Dogecoin has a market cap of $11.88 billion. Shiba’s $6.9 billion market cap is 58% of Dogecoin’s market value.
That is probably way too high, given how much more well-known and useful Dogecoin is, especially in the payments arena. For example, if Shiba Inu were just one-quarter of Dogecoin’s market cap, it would drop to about $3 billion. That implies it could fall by 56% from $6.88 billion to $3 billion.
That is how easy SHIB crypto could drop and how volatile it could potentially be going forward. One way this could turn around is if Shiba Inu picks up use cases. This could be in the form of merchants that agree to accept Shiba crypto as a form of payment. Unfortunately, that is not happening as fast with Shiba as it is with Dogecoin. That is why Dogecoin deserves a much higher valuation than Shiba Inu.
The bottom line here is that investors should tread very carefully with SHIB crypto. They will likely have the chance to buy the crypto even cheaper.
On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guideline