During 2021, at the height of meme-stock mania and amid a crypto bull market, Shiba Inu (SHIB 2.47%) saw its price skyrocket. Those who were lucky enough to get in benefited from tremendous gains.
But it's been a different story over the past couple of years. The excitement around this dog-inspired cryptocurrency has dropped off significantly. As of this writing, the price of Shiba Inu is down 92% from its October 2021 all-time high.
Some bold investors might be eyeing this crypto as a potential buying opportunity, while critics think it's best to stay far away. What course of action should you take? Here's a look at both sides of the aisle.
Reasons to own this meme token
Developers recently introduced a layer-2 scaling solution known as Shibarium, to attract more activity onto the network from users for different applications, like non-fungible tokens and gaming services. Before the update, Shiba Inu was facing limited scalability and transaction throughput, as well as elevated fees. Shibarium promises to improve upon these issues to boost utility, which could drive demand for the token and help propel its price.
One of Shiba Inu's most noticeable qualities is its gargantuan token supply. There are currently 589 trillion tokens circulating, which is a massive figure that helps explain why the nominal price of a single unit is so low. However, developers have implemented a coin-burning strategy to completely eliminate tokens from the outstanding supply.
One optimistic estimate calls for 111 trillion tokens to be burned per year, while another says 33 billion annually. It's anyone's guess what will happen, but the hope is that a decreased supply will lift the token's price higher.
As is the case with most cryptocurrencies, Shiba Inu benefits when there's strong interest from its community of followers. Using social media to get the token on top of investors' minds, the excitement surrounding Shiba Inu can soar in no time. Plus, when tech mogul Elon Musk tweets about the token, it can have a major impact on the price.
Shiba Inu bulls could be looking to add this cryptocurrency to their portfolios with the expectation that a surge in community interest can lead to profits.
It's best to avoid Shiba Inu
The reasons to avoid Shiba Inu hold much more weight than the arguments for buying it. An individual cryptocurrency's long-term viability depends solely on its capabilities to bring about real-world use cases. There are so many cryptocurrencies out there that it's hard to see where Shiba Inu has any competitive edge, and this makes me question if its existence is even necessary.
When it comes to blockchain networks that possess functionality for smart contracts, investors might be more interested in Ethereum, Cardano, or Solana, which are all more promising than Shiba Inu. Far more developers are working on these three cryptocurrencies, raising the likelihood they'll end up being more successful.
I'm also not a believer in Shiba Inu's coin-burning plan. It seems more like financial engineering than focusing on what really matters, which should be trying to increase utility and adoption. Burning enough tokens to put a meaningful dent in a sum of 589 trillion seems like an impossible uphill task that I'm not optimistic can be executed successfully.
Lastly, I think anyone who purchases Shiba Inu will be doing so from a purely speculative angle. It's impossible to predict when the next community-hype cycle will happen, and this seems to be the only possibility to drive up the token's value.
Some people might be eyeing Shiba Inu in the hopes of benefiting from a monster price run-up like what we saw in 2021. But this isn't a prudent way to invest your hard-earned savings. The no-brainer decision is to stay far away from this meme token.
Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cardano, Ethereum, and Solana. The Motley Fool has a disclosure policy.