Last October, the total worth of all cryptocurrencies was around $4.4 trillion, but it’s now dropped to about $2.4 trillion. The industry is in a bit of a pickle, with adoption rates for even major coins plummeting. Investors seem to be scaling back their investments in risky assets amidst a backdrop of economic uncertainty.
All the big cryptocurrencies have taken a hit from their all-time highs. Bitcoin is down by 43%. Meanwhile, speculative meme coins are exacerbating the losses for a smaller section of the market. Shiba Inu (SHIB +0.19%) and dogecoin (Doge -0.52%) have both seen declines of nearly 70% from their 52-week peaks.
Given these trends, I think it’s reasonable to expect that both meme coins could drop another 50% or even more in the long run.
The relevance of Shiba Inu is fading
Shiba Inu was launched in 2020 by an unidentified developer who was inspired by Dogecoin’s rise and sought to create a faster, cheaper alternative. It’s built on Ethereum, which lends it some legitimacy given that Ethereum is one of the most established and secure crypto networks.
In 2021, Shiba Inu saw an astounding return of 45,278,000%. This made it possible for someone who invested just $3 at the right time to turn that into over $1 million. However, this dizzying rise was fueled purely by speculation, so it’s not surprising that the momentum has waned. As mentioned, the token is nearly 70% off its 52-week high and down 93% from its peak in 2021.
For cryptocurrencies to truly flourish, they require consistent demand. This demand could come from consumers using it for purchases or from investors considering it a solid store of value. Unfortunately, Shiba Inu hasn’t generated much interest from consumers, and given its steep drop, it’s hard to see anyone viewing it as a reliable store of value.
A cryptocurrency directory, Cryptwerk, notes that only 1,144 businesses globally accept Shiba Inu as payment. This limited adoption is understandable, considering the coin’s extreme volatility, which complicates cash flow. If consumers can’t use tokens where they shop, there’s little incentive to hold them.
This year, developers introduced a layer 2 blockchain called Shibarium to improve Ethereum’s network inefficiencies, aiming to boost usage. While it facilitated faster and cheaper transactions, adoption still hasn’t increased.
Without sustainable demand, Shiba Inu seems likely to decline further, leading me to believe it could lose another 50% of its value in the long term.
Dogecoin faces supply challenges
Dogecoin was created in 2013 by two friends who thought the crypto market was too serious. At the time, Bitcoin was enjoying rapid popularity, attracting a lot of attention. Wanting to inject some humor into the scene, they admitted Dogecoin was a joke.
Interest in Dogecoin surged when Elon Musk began tweeting about it back in 2019. While Musk didn’t promote it for specific uses, he clearly found it entertaining, regularly posting memes and engaging with fans.
By 2021, Dogecoin’s market cap had soared to over $90 billion, making it one of the largest cryptocurrencies. But similar to Shiba Inu, this rise was largely speculative.
Currently, Dogecoin has dropped 87% from its peak in 2021, faced with a critical long-term issue: supply. New Dogecoin units are continuously created through mining, where validators confirm transactions and add new blocks. Since mining involves solving complex equations that are costly, validators are compensated in Dogecoin.
Each year, a maximum of 5 billion coins can be mined, while 153.7 billion are already in circulation. This means the supply could essentially double in the next 30 years, potentially halving the value of each coin. For Dogecoin to maintain its market cap over time, it would need a sustainable source of demand to support its value, which is a significant hurdle considering that its main appeal seems to be for amusing posts by Musk.
Unfortunately, like Shiba Inu, Dogecoin struggles to convince users and merchants that it’s a viable payment option or a credible store of value.
