Could Shiba Inu hit $0.001 in 2022?

If you think stock market gains have been impressive since the pandemic low of March 2020, take a closer look at cryptocurrencies. While the broad base S&P500 doubled in value, the total market capitalization of all digital currencies increased by more than 1,450% between March 2020 and the end of 2021.

The crypto market has made investors rich in a very short time. This is especially true for investors in the same coin shiba inus (CRYPTO:SHIB).

Shiba Inu themed coins were incredibly popular among crypto investors in 2021. Image source: Getty Images.

The Plan for Historic Shiba Inu Gains

In over two decades of investing, I’ve seen jaw-dropping gains in a single year. But while five-digit 12-month percentage gains are fairly rare in the stock market, among cryptocurrencies gains of 25,000% — even as high as 1,200,000% — have occurred within a span of relatively short time. But the roughly 46,000,000% that SHIB tokens have gained in 2021 is staggering. The value of the coin has gone from $0.000000000073 to around $0.000034. An investment of just over $2 at midnight on January 1, 2021 would have made a Shiba Inu investor a millionaire by the end of the year.

Several factors worked in Shiba Inu’s favor last year to achieve such huge gains in a short period of time.

SHIB’s increased visibility certainly provided one of the biggest boosts. Even though Shiba Inu is not yet listed on Robin Hood, it has found its way onto many other popular crypto exchanges. The launch of the decentralized exchange ShibaSwap also helped. New stock exchange listings and ShibaSwap helped improve liquidity. Additionally, ShibaSwap encouraged SHIB holders to stake their coins in order to earn passive income. Staking encourages holders to keep their tokens longer.

No discussion of the 2021 Shiba Inu history can ignore the role that fear of missing out (FOMO) has played. At its peak in the fourth quarter, Bitcoin had gained 8,000,000,000% from its first price in July 2010. With proof that life-changing gains are possible, SHIB buyers were not scared off by the possibility of a price reversal. In fact, some have used social media as a way to boost Shiba Inu prospects.

The excitement over the increased usefulness is also palpable. Last year, Shiba Inu landed two major merchants: a chain of cinemas AMC Entertainment and technology-driven online retailer Newegg Commerce.

Finally, Shiba Inu investors showed obvious enthusiasm for the future. In 2022, developers are expected to roll out the Layer 2 blockchain upgrade known as Shibarium, which is designed to reduce transaction fees. Eventually, games based on non-fungible tokens (NFTs) are also expected.

A person holding a white puzzle piece, with a large question mark drawn on it.

Image source: Getty Images.

Can Shiba Inu reach $0.001 in 2022?

What is clear is that optimistic Shiba Inu are mostly inelastic buyers. They think a big upside awaits them, even after a 46,000,000% gain last year. But can Shiba Inu really eat extra zeros after his decimal point in 2022? In other words, is a price target of, say, $0.001 really achievable this year?

The answer? Highly unlikely.

Although Shiba Inu has apparently exceeded all expectations in 2021, there are five main reasons why its chances of hitting $0.001 in 2022 are extremely low.

For starters, Shiba Inu offers no real competitive advantage or differentiation. It is an ERC-20 token built on the Ethereum blockchain which is subject to the same processing delays and high transaction fees that sometimes plague the Ethereum network. While Shibarium may mitigate its transaction cost disadvantage, Shiba Inu still reportedly lacks any defining characteristics that would make it or its proposed ecosystem the preferred choice for merchants and people wishing to pay with digital currencies.

A second problem is that Shiba Inu is constantly being diluted in the crypto space – not by new SHIB tokens, but rather by new blockchain-based projects. Cryptocurrencies that lack a competitive edge are constantly under attack from new projects that offer faster processing times and/or low transaction fees. Although many blockchain projects come to nothing, at least some will provide operational advantages over Shiba Inu.

A neatly staggered stack of hundred dollar bills transforming into digital currency on the blockchain.

Image source: Getty Images.

A third lingering problem with SHIB, which I’ve touched on before, is its lack of real-world utility. Having already mentioned that it has no competitive advantage, we can also see from real-world adoption that few merchants accept it as a payment method. Online business directory Cryptwerk shows that only around 600 global merchants accept SHIB as payment, with 44 of these “merchants” being nothing more than crypto exchanges. That’s just over 550 mostly obscure online businesses that accept SHIB, while there are over 500 million entrepreneurs worldwide. Its usefulness outside of a crypto exchange is almost non-existent.

A fourth reason to be very skeptical of Shiba Inu hitting $0.001 is the role (or should I say lack thereof) that coin burning will play. Last year, Ethereum co-founder Vitalik Buterin, who received about half of SHIB’s circulating supply, sent over 410 trillion tokens to a dead blockchain address. With these coins now taken out of circulation (i.e. burnt), each remaining token is perceived to have more value.

The problem is that 1) coin consumption will not be close to 410 trillion tokens in 2022, or at any time in the future, and 2) having fewer SHIBs in circulation does not improve network efficiency by terms of transaction fees. or block the purpose. Burning coins does not bring any tangible benefit to investors.

Fifth and finally, the story is simply not on Shiba Inu’s side. In previous cases where payment coins and payment network protocol tokens grew from 24,000% to 461,000% in a relatively short period of time, they then declined from 93% to 99% over a period of two years. Given that Shiba Inu has gained 46,000,000% in 12 months, history suggests that an equally epic retracement lies ahead.

While anything is possible in the cryptocurrency space, there is no reason to believe that Shiba Inu will hit close to $0.001 (a market value of $549 billion) in 2022.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

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