Few assets have demonstrated more millionaire-maker potential than Shiba Inu (SHIB -0.92%), a controversial cryptocurrency that soared by 45,278,000% in 2021. But this unprecedented rally was based on hype instead of sustainable fundamentals, and the token gave back most of its gains by mid-2022.
Now, Shiba Inu is rising once again. Let’s discuss its pros and cons to decide if it has become a good long-term buy.
A more speculative way to bet on crypto
Meme coins, which started in 2013 with the launch of Dogecoin, are less serious cryptocurrencies based on internet jokes. Unlike mainstream cryptocurrencies, they aren’t designed for real-world utility or to improve upon the shortcomings of other networks. Shiba Inu was created in 2020 as an alternative to Dogecoin, and it copies some of the older cryptocurrency’s branding, such as the Shiba Inu hunting dog.
Over the long term, meme coins tend to be poor investments because they are often controlled by anonymous developers with little accountability. Their typically small size also makes them vulnerable to exit scams (also known as rug pulls), where the majority holders dump their stakes for a profit and abandon the project. That said, there could be a silver lining for some of these controversial assets.
Can meme coins “graduate?”
The truth is that no cryptocurrency boasts significant real-world utility. According to Statista, only 0.2% of online transactions are made using digital assets.
And while programable blockchains like Ethereum have vast ecosystems of decentralized applications (dApps), most haven’t left the speculative and experimental stage. To that point, Shiba Inu itself is a token programmed on the Ethereum network.
In general, cryptocurrencies (meme coins or otherwise) get their value based on what other people are willing to pay for them. And as meme coins like Shiba Inu gain more mainstream acceptance over time, they could eventually become viable alternatives to the big names.
Image source: Getty Images.
Is the Trump administration a catalyst for growth?
Shiba Inu prices have risen around 92% over the last 12 months, and some of this might be related to political optimism. On the campaign trail, President-elect Donald Trump struck a conciliatory tone toward the cryptocurrency industry, suggesting he might create a Bitcoin strategic reserve and potentially ease regulations on digital assets.
If true, this would mark a significant departure from the Biden administration, which saw the Securities and Exchange Commission (SEC) file lawsuits against major industry players like Coinbase over alleged violations of securities law.
According to The Associated Press, Trump plans to fill the open spot following the announced resignation of the current SEC head, Gary Gensler, with cryptocurrency advocate Paul Atkins, who is widely expected to take a softer approach.
Less regulatory uncertainty could open the door for more stable institutional ownership in the industry, which could reduce volatility and support growth. That said, the early benefits will probably flow to more established coins like Bitcoin and Ethereum. And it could take years for Shiba Inu to shed its meme coin stigma.
Is Shiba Inu a buy?
Right now, most of the bullish catalysts for Shiba Inu this year are related to the cryptocurrency industry as a whole, not Shiba Inu specifically. The token doesn’t have many fundamental advantages that help it stand out from the thousands of other competing projects.
If Shiba Inu remains popular over the long term, it could eventually shed the meme-coin stigma and become more accepted as an investment vehicle despite its lack of real-world utility. But until then, investors may want to stick to the more established coins like Bitcoin and Ethereum, which stand to benefit the most from potential industry deregulation.
Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, and Ethereum. The Motley Fool has a disclosure policy.
