Has Shiba Inu just landed its first major retailer?
No investment vehicle dating back several generations has proven to be a better wealth builder than the stock market. Since the beginning of 1980, the average annual total return (ie including dividends) has been broadly based S&P 500 is over 11%, which outperforms assets like real estate, bonds, and gold.
But compared to select cryptocurrencies in recent years, those returns are ridiculously low. This is especially true of the ultra-popular Shiba Inu (CRYPTO: SHIB)which has gained more than 11,000,000% since its debut day on August 1, 2020.
In 15 months, SHIB has increased by more than 11,000,000%
How exactly does a digital currency gain over 11,000,000% in just over 15 months?
Obviously, the fear of missing out on something, better known as FOMO, plays a role. Cryptocurrency investors sat back and watched Bitcoin nearly 8,000,000,000% profit since its debut in July 2010 and are looking for the next digital currency that can fly to the proverbial moon. Since crypto investors tend to be younger, their appetite for risk and volatility tends to be higher than most others. Long story short, they are ready to chase those big wins even higher.
The launch of the decentralized exchange ShibaSwap in July also helped propel SHIB higher. The key aspect of ShibaSwap is that it allows “hodlers” to wager their coins to generate passive income. Not only will this improve liquidity for SHIB, but it will also encourage investors to hold out for longer periods of time. In just over three weeks, the median holding period for SHIB has doubled from six to twelve days.
Tesla engines‘Elon Musk is also responsible for sending Shiba Inu to heaven. Even if a look under the hood showed that Musk does not own SHIB, he still posts Shiba Inu dog memes Twitter with some regularity. The richest person in the world recently adopted a Shiba Inu dog he named Floki.
Lastly, visibility was important. A growing number of cryptocurrency exchanges have Shiba Inu listed for trading. This has helped increase the number of unique wallets containing Shiba Inu coins to more than 925,000.
Shiba Inu may have its first major dealer
Speaking of visibility, Shiba Inu’s greatest chance of success would be that more merchants would accept it as a form of payment. Earlier this week, SHIB investors’ dreams may have been fulfilled.
During the cinema chain AMC entertainment‘S (NYSE: AMC) Following the release of Q3 operating results, CEO Adam Aron noted that his company was “exploring” ways to accept SHIB tokens. This would lead to AMC already announcing that it would accept online payments in Bitcoin. Litecoin, ether, Bitcoin cash, and Shiba Inu rival Dogecoin.
For what it’s worth, it said on the wall that AMC would hug Shiba Inu last month. On October 29, Aron posted a poll on Twitter asking if Shiba Inu should be accepted for AMC gift card purchases. A whopping 87.6% of the 153,100 votes were in favor of Shiba Inu as an acceptable payment option. With AMC losing money, Aron has shown his willingness – more than any publicly traded company CEO – to behave on retail investor Twitterverse about what to do.
While in theory this would be a solid win on paper for Shiba Inu investors, the use case isn’t as promising as it might seem. For example, Shiba Inu is an ERC-20 token based on the Ethereum blockchain. Because of its popularity, Ethereum’s network is prone to congestion, which can drive up transaction fees. Either SHIB holders do not use their tokens due to high transaction fees or AMC has to eat up the conversion costs. Neither path is ideal.
To make matters worse, every time SHIB holders use their tokens to pay for goods or services at AMC, it would become a taxable transaction, according to the Internal Revenue Service. Are people really going to use cryptocurrency to buy a $ 20 gift card or a $ 10 movie ticket if they have to go to the trouble of reporting it on their tax returns? My strong suspicion is no.
Shiba Inu is a disaster waiting to happen
While the prestige of attracting a large trader could puff SHIB for a very short period of time, it doesn’t negate the fact that Shiba Inu is of virtually no use outside of a cryptocurrency exchange. According to the online business directory Cryptwerk, only 110 dealers worldwide accept SHIB as a means of payment. This compares to more than 32 million companies in the US and over 500 million entrepreneurs worldwide.
In addition to the non-existent benefits of SHIB, there is the aforementioned average holding time of just 12 days. Although this number has doubled since mid-October, it is still well below other popular cryptocurrencies. The point is, Shiba Inu has attracted day traders and speculators – not the buy-and-hold investors necessary to sustain SHIB’s historic rise.
But arguably the main reason Shiba Inu looks like a disaster waiting to happen is the lack of competitive advantage. Shiba Inu may be generating a lot of social media buzz right now, but there is nothing that stands out from other payment coins and blockchain projects.
There is also strong evidence that life-changing cryptocurrency gains are followed by violent setbacks. When I recently examined three soaring cryptocurrencies, I found that their historical gains were followed by declines of between 93% and 99% over the next 12 to 26 months.
With nothing standing in the way of this real differentiation, Shiba Inu risks an epic fall in the coming weeks, months and years.
This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.