With just four weeks left before we say goodbye to 2021, it looks like we'll witness another year where cryptocurrencies perform better than the stock market.
The benchmark S&P 500 has easily surpassed its average annual gains. The widely followed index had risen almost 25% since the year began. Since the beginning of 1980, the S&P 500 has averaged a total return, including dividends, of over 10%.
The gains for digital currencies have been more robust. The total value of all cryptocurrencies on Nov. 29 was over $2.57 trillion, after the aggregate market cap of all cryptocurrencies had been about $774 billion. That's an increase of 232% in a day.
The jaw-dropping return of the year goes to the dogs, even though the "Big Two" are responsible for most of this nominal increase.
The inspiration behind a number of high-flying cryptocurrencies is the breed of dogs. The image is from the same source.
$2 turned into more than $1 million.
The year-to-date gain for the coin was for the ages as we prepared to enter December. At midnight on New Year's Day, the price of the SHIB token was only $0.0003. The same token was changing hands for less than a dollar. In moving from 10 zeroes to four, Shiba Inu has gained 65 million dollars. If you invested $2 at midnight on New Year's Day, you would be a millionaire.
There are many catalysts that have helped push the valuation of Shiba Inu into the stratosphere. The fear of missing out has been a key factor in pushing SHIB higher. The Shiba Inu community has been able to use social media to create buzz and hype for their coin after watching the success of Bitcoin.
Increased visibility and liquidity are doing their part. The community has grown beyond 1 million hodlers because more exchanges are accepting SHIB for listing. The launch of ShibaSwap in July of 2021 allows hodlers to stake their coins, which will give investors incentive to hold for a longer period of time.
The first major merchant win for Shiba Inu is being celebrated. In October, AMC Entertainment CEO Adam Aron asked if his company should accept SHIB token. 87.6% of the respondents were in favor of the move. AMC expects to have the Shiba Inu coin integrated into its online payment platform in the first quarter of 2022.
The icing on the cake is a message from Musk. Even though Musk has nothing to do with the Shiba Inu project, he recently adopted a dog and is known for posting meme about it. These are all-out buy signals for dog-themed coins.
The image is from the same source.
A year-to-date gain of more than 65,000,000% is incredible. It's crazy to think that on October 27th, when the stock hit an all-time high, it was up over 121,000,000%. The self-proclaimed "SHIBArmy" thinks it could go even higher.
One common theme is the belief that the SHIB could hit $1 per token. From the time of this writing, we're talking about a gain of 2,099,417% for SHIB. The realistic chance of SHIB making a run at $1 is zero after delivering a 65,200,000% year-to-date return. Not 1 in a million or 10 billion. It's zero.
Let's start with the market value. It is easy to get lost in the idea of small coins and large token counts. It is thought that it would be easier for a coin to double from $0.00002 to $0.00004 than it would be for a digital currency to go from $20 to $40.
The move is the same, but investors think the low-priced security has a better chance of doubling. It's the same premise that encourages new investors to chase penny stocks, which leads to them getting burned.
The market cap of the 548.05 trillion SHIB token is $549.05 trillion. Apple is the largest publicly traded company on the planet with a market cap of over $2 trillion. The U.S. is expected to lead the world in GDP in 2021. Shiba Inu would have a valuation six times greater than the global GDP. It wouldn't happen.
Cryptocurrencies become larger and more widely known, which leads to more derivative trading options. For instance, investors can trade off funds and futures with Bitcoin. Big money can easily place bets against digital currencies with derivatives. If Shiba Inu uses its social-media buzz, hype, and FOMO to rise in the ranks, the big-money bets against it would almost certainly crush it.
The image is from the same source.
Wait, there's more.
There are a number of reasons to be critical of the current market value of $26 billion, which is six times the global GDP.
Shiba Inu has a limited real-world use case. Most cryptocurrencies have a limited real-world use case, with the exception of Bitcoin, which is now legal tender in El Salvador. For a coin that's been hovering around the top 10 in terms of market cap, having fewer than 375 merchants worldwide accept SHIB as a form of payment is laughable. A lot of these merchants are involved in the business ofCryptocurrencies. Shiba Inu has no use outside of a coin exchange.
AMC is likely to prove symbolic as its first major merchant. It's not likely that SHIB will use much for purchases at AMC since they would result in high transaction fees and a tax on the event.
The bigger concern is that Shiba Inu doesn't offer anything that resembles a competitive edge. Its community is good at generating hype and buzz on social-media boards, but that's not going to provide lasting value.
The high transaction fees and processing lag times that hit the Ethereum network can cause Shiba Inu to be vulnerable. There are many better payment coins that have lower transaction fees and quicker settlement times.
History says that Shiba Inu is doomed. Digital currencies have a tendency to retrace more than 90 percent in an equally short time frame when they deliver life-changing gains.
It's very likely that the world's hottestcryptocurrencies won't sustain its current market value moving forward because of the ridiculous idea of hitting $1.
The writer of this article may disagree with the official recommendation position of a premium advisory service. We are motley! Asking an investing thesis helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has shares of and recommends Apple. The long March 2023 $120 calls on Apple are recommended by The Motley Fool. The Fool has something.
Sean Williams has no position in any of the stocks. The Motley Fool has shares of and recommends Apple. The long March 2023 $120 calls on Apple are recommended by The Motley Fool. There is a disclosure policy for The Motley Fool.