If you’re in the crypto space, you’ve undoubtedly heard about meme coins like Dogecoin (DOGE), Shiba Inu (SHIB), and dozens of others. Despite being created as a joke, billions of dollars have poured into them. Dogecoin currently has a market cap of $8.6 billion and Shiba Inu sits at $4.2 billion. Expectations and speculation on social media have created a frenzy with many influencers targeting $1 for Shiba Inu. As of the writing of this, the price of one Shiba Inu token was $0.000007285. This would equate to a 13,726,836% increase to achieve that $1 target.
Before we dive into the reality check on the numbers above, it’s important to evaluate a cryptocurrency on several factors before investing. I always look at 4 things: Purpose, Utility, community, and tokenomics.
#1 – Purpose – Shiba Inu was created by an anonymous group of developers with the intention of capitalizing on the popularity of Dogecoin. Dogecoin was created as a joke by Billy Markus and Jackson Palmer back in 2013. They needed an icon for their new coin and decided on using their dog Doge’s face. Doge was a Shiba Inu breed of dog. Shiba Inu developers simply named their token Shiba Inu to take advantage of the meme coin hype. It is intended to be a peer-to-peer payment network and offers programmability. However, it is built on top of Ethereum, which limits its potential. Being an ERC-20 token on the Ethereum blockchain makes it incredibly easy to create. It would take you 7 minutes to create a token like Shiba Inu.
#2 – Utility – Whether it is a coin or a token, it’s critical that it has utility. That it serves a purpose and can be used for something. With Ethereum, a large portion of its utility is access. You must use ETH to access the Ethereum network. Think of it like an admission ticket to the hottest club in town. Compared to the over 3,000 different projects on the Ethereum network, Shiba Inu’s 8 projects just doesn’t cut it.
#3 – Community – This can be broken down into two categories: Fans & Developers. When it comes to fans, Shiba Inu is massive! Anyone in the crypto space with $5 left is waving the flag screaming on any social media channel they can find that SHIB is going to $1. When it comes to developers, Shiba Inu is weak at best. Most developers are going to work on projects which score high marks in points #1 & #2 above.
#4 – Tokenomics – This refers to several things, including: how the tokens are created, how many of them there are and who owns what. From the beginning, there was 1 quadrillion tokens created. Yes, I’ll repeat that ONE Quadrillion. The only brilliant thing about Shiba Inu is what they did after they created the token. They found Vitalik Buterin’s (the creator of Ethereum and industry icon) Ethereum wallet and unbeknownst to him, sent nearly 50% of all tokens to him. They then began a social media campaign stating that Vitalik was “Loading the boat” on Shiba Inu. This created a frenzy in the crypto space with many buying into the bogus story. Upon realizing this, Vitalik donated $1.2 billion worth of the tokens to an India COVID-19 relief fund, and burned the remaining $6.7 billion dollars’ worth. Effectively sending them to a wallet which nobody can access. That now leaves roughly 589 trillion tokens in circulation.
Here lies the one significant data point which renders the discussion of Shiba Inu reaching $1 an impossibility. If Shiba Inu were to reach $1, its market capitalization would be $589 Trillion dollars. To put it into perspective, Apple (AAPL), which is the largest publicly trade company in the world, and a household name in nearly every country around the globe, has a market capitalization of $2.74 trillion. At $1, that would make Shiba Inu 214 times bigger than Apple. Not going to happen!
Dr. Greg Laughlin, an astronomy professor at Yale University, estimates the value of earth and everything on it at around $5 quadrillion dollars. To say that the value of a meme coin, which has little to no utility, is going to be worth 1/9th the total value of all life and money on earth is laughable. There is absolutely no way that Shiba Inu will ever be at $1 with 589 trillion tokens currently in supply. Probability = 0%
While I am excited for many projects in the cryptocurrency ecosystem, the vast majority are pump and dump scams. As an investor, educate yourselves and make sure that you know what it is that you are buying. Most people are not looking at the facts and simply focusing on the “lotto ticket” cryptocurrency scams. Shiba Inu should be bought with money that you are confident you will lose. Over time, all meme coins, and a majority of the 1.8 million different coins & tokens, will ultimately go to zero. It is a distinct parallel to what happened with the dot com businesses of the late 90s and early 2000s. While most failed, those with strong business models, utility, and leadership, like Amazon, Google, Netflix etc., succeeded. Invest in winners not a social media influencers recommendation and hype.
On the date of publication, Merlin Rothfeld did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
