The underdog cryptocurrency isn't impressing the bulls.
Shiba Inu's (SHIB 1.31%) price has declined 8% over the past week, and it's lost 14% of its value since the beginning of the year. That marks a rough start to the year for this tiny meme coin, which remains 90% below its all-time high from Oct. 28, 2021. So let's see if it looks like it might bounce back over the next few months.
Shiba Inu's early investors made a lot of money
When Shiba Inu was launched on Aug. 1, 2020, many investors dismissed it as a joking parody of Dogecoin, which was named after the Shiba Inu dog from the viral "doge" meme. Shiba Inu also couldn't be directly mined like Bitcoin, since its entire supply of 1 quadrillion coins had already been pre-mined on the Ethereum blockchain, and it seemed unlikely that many businesses would accept it like Bitcoin for regular payments.
Image source: Getty Images.
Nevertheless, investors who bought just $100 of Shiba Inu at its launch price of $0.000000000056 would have watched their investment briefly grow to $154 million at the peak of the crypto rally, before settling down to about $15.7 million today.
Shiba Inu's rally was initially driven by people with stimulus check money they wanted to spend; a "fear of missing out" (FOMO) fueled by social media buzz; its launch of ShibaSwap, a decentralized exchange that allows its investors to trade their coins for other cryptocurrencies and earn interest; and its listing on Coinbase in 2021. But it gave up a lot of those gains in 2022 as rising interest rates rattled the cryptocurrency market.
Why did Shiba Inu's price drop over the past week?
At the end of 2023, the bulls expected several catalysts to drive Shiba Inu's price higher. Stabilizing interest rates could finally end the "crypto winter," and more businesses might follow AMC's lead and accept Shiba Inu as a payment method.
Shiba Inu also expanded its ecosystem with Shibarium, a new blockchain protocol built on Ethereum that supports the development of decentralized apps (dApps), and ShibaDEX, a cross-chain decentralized exchange (DEX) that serves as an official crypto wallet for its own tokens. To reduce its available supply and stabilize its price, it started "burning" its own tokens to take them out of circulation over the past year.
But above all else, the bulls expected the Securities and Exchange Commission's (SEC) approval of the first Bitcoin spot price exchange-traded funds (ETFs) to finally light a blazing fire that would warm up the chilly cryptocurrency market.
Unfortunately, two expected catalysts fizzled out in January. First, a resilient jobs report suggested the Federal Reserve wouldn't rush to cut interest rates in 2024. Second, Bitcoin's price actually tumbled after the recent ETF approval and this dragged down the broader crypto market. That decline suggests that too much hype had already been priced into the crypto market ahead of the ETF approvals, and that short-term traders were eager to take profits.
Shiba Inu also faces longer-term challenges. A few mysterious "whales" still hold trillions of Shiba Inu tokens in their wallets and can drive some massive price swings. Its attempts to expand its ecosystem with dApps and a DEX won't really differentiate it from other Ethereum-based tokens like Solana, and it still seems unlikely it will ever be as widely accepted as BTC or ETH for mainstream payments.
Will Shiba Inu's price bounce back?
Shiba Inu will probably remain out of favor unless interest rates decline, Bitcoin's price stabilizes, and the crypto winter finally ends. It might make wild and unpredictable moves over the next few weeks, but I don't think it can maintain its gains throughout the year without any clear catalysts on the horizon. It might be an exciting speculative play for the cash you can afford to lose, but it's simply not a worthwhile long-term investment yet.
Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, Ethereum, and Solana. The Motley Fool has a disclosure policy.
