Returns as of 12/05/2021
Returns as of 12/05/2021
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For more than 100 years, one of the smartest and most-effective ways to build wealth has been to put your money to work in the stock market. Stocks might not outperform housing, gold, or bonds every year, but equities have delivered a considerably higher average annual return over the very long term than these other investment vehicles. In fact, the S&P 500 has averaged an annual total return, including dividends, of greater than 11% since the beginning of 1980.
But there’s another investment that could have made you wildly rich in 2021, and all it would have taken is the loose change on your nightstand.
Image source: Getty Images.
It’s no secret that cryptocurrencies have been virtually unstoppable over the past couple of years. This has been especially true since the coronavirus crash that bottomed in March 2020. The aggregate value of all cryptocurrencies has skyrocketed more than 18-fold to $2.56 trillion in 20 months.
While there have been a number of notable four-digit percentage year-to-date moves in the crypto space, none of these gains have been more jaw-dropping than the rally we’ve witnessed in meme-based coin Shiba Inu ( SHIB 1.91% ).
Break out your magnifying glass, because when the curtain lifted on 2021, a single SHIB token cost $0.000000000073. As of Nov. 23, these same SHIB coins were going for $0.00004041. It might be tough to run the math with so many zeroes in the way, but this works out to a 55,356,064% gain in under 11 months.
To put this mammoth return into perspective, if crypto investors had purchased $1.81 worth of SHIB at midnight on Jan. 1, 2021 and had the luck, stomach, and wherewithal to hang onto their investment, it would be worth $1,001,945 on Nov. 23. 2021. Comparatively, the average cup of coffee in the U.S. runs $2.70. For about two-thirds the cost of the average cup of Joe, Shiba Inu investors became millionaires in less than 11 months.
Crypto investors have piled into Shiba Inu-themed coins in 2021. Image source: Getty Images.
You might be wondering how any investment could catapult higher by more than 55,000,000% in under a year. The answer to Shiba Inu’s historic run is the result of a multitude of factors.
Perhaps the strongest wind in SHIB’s sails comes from the fact that it’s not easy to short-sell digital currencies. Short-sellers are investors betting on downside in a security. In the case of the world’s largest cryptocurrency Bitcoin, it’s relatively easy for the so-called big money to place its bets on the downside because Bitcoin has tracking funds and derivatives that allow pessimists to place their bets.
But that’s not the case with most lesser-known coins like Shiba Inu. Without a large short-selling presence, it’s created a natural buy bias for SHIB.
The world’s hottest digital currency has also received a boost from a growing number of cryptocurrency exchanges accepting it for listing. More exchanges allowing SHIB to be traded means better liquidity, improved movement awareness, and the likelihood of a growing community. At the time of this writing, Shiba Inu was nearing 1 million unique wallet holders, according to Etherscan.
To somewhat build on this point, the launch of decentralized exchange ShibaSwap has helped, too. ShibaSwap is lifting liquidity and, more importantly, allowing hodlers to stake their tokens to earn passive income. This staking process should encourage investors to hang onto their coins for longer periods of time.
Credit also goes to Ethereum co-founder Vitalik Buterin. The mysterious Shiba Inu founder who goes by the name “Riyoshi” sent roughly half of the 1 quadrillion token supply to Buterin. Not wanting to be responsible for the future of Shiba Inu, Buterin donated 50 trillion SHIB to the India Crypto COVID-19 Relief Fund and sent approximately 410 trillion SHIB to a dead blockchain address. Since these coins are no longer in circulation, this action “burned” about 41% of the outstanding supply of SHIB tokens.
Lastly, the fear of missing out (FOMO) is clearly doing its part. Having watched Bitcoin surge 8,000,000,000% in a little over 11 years, crypto investors are of the mindset that anything is possible with a big enough community and lots of social media support.
Image source: Getty Images.
However, some gains are a bit too good to be true. While Shiba Inu has managed to deliver historic short-term gains for its hodlers, the future for the world’s hottest cryptocurrency looks quite bleak.
For instance, history is not on Shiba Inu’s side. Although Bitcoin has managed to deliver insane longer-term gains, the outlook following five- and six-digit percentage-point gains for other payment coins is poor. When I examined a number of popular payment coins following their peaks, I found they all declined by 93% to 99% within 26 months. At the time of this writing, SHIB was already more than 50% below its Oct. 27 high. If history has a say, SHIB will be clobbered in 2022.
Another issue for Shiba Inu is that coin burn is no longer the driver it once was. Taking 410 trillion coins out of circulation with the click of a button changed the dynamics of Shiba Inu. But with only a few million tokens burned here and there, coin burn isn’t going to move the needle like it once did.
The median hold time for Shiba Inu is also lower than other popular cryptocurrencies. What this tells us is that investors are in SHIB for momentum swings and aren’t true believers in its long-term potential.
But perhaps most worrisome is the fact that Shiba Inu holds no comparative advantages to other popular payment coins. While its hodlers are good at generating buzz on social media, that’s not going to coerce the vast majority of companies to accept SHIB as a form of payment (save for AMC Entertainment). Without any true advantages or differentiating positives, Shiba Inu coin looks destined to fade into obscurity over time.
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*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/05/2021.
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Calculated by Time-Weighted Return since 2002. Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns as of January 1, 2021.
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