Why might someone consider investing in a meme coin instead of a well-established company stock?
Bitcoin (BTC 3.75%) and Shiba Inu (SHIB 7.92%) tend to draw in different types of investors. Bitcoin, recognized as the largest cryptocurrency with a market cap of $2.43 trillion, is often viewed as a “blue chip” token. Its value stems from its limited supply, likening it to gold.
On the other hand, Shiba Inu—initially developed as a parody—boasts a market cap of $7.2 billion and is part of the meme coin category. Dogecoin (Doge 11.96%), which is actually a parody of Bitcoin, is in a similar boat. Over the past year, Shiba Inu’s value has dropped by around 30%, whereas Bitcoin has climbed by 95%.
Often, it might seem wiser for investors to lean toward Bitcoin rather than Shiba Inu. But is there a reasonable argument that supports investing in Shiba Inu instead?
What sets Bitcoin and Shiba Inu apart?
Bitcoin operates on an energy-heavy proof-of-work (PoW) model, with mining difficulty increasing every four years due to a scheduled “halving” process. Currently, 19.9 million of its capped 21 million tokens have been mined. This intentional scarcity draws parallels to gold and other tangible assets.
In January, the Securities and Exchange Commission (SEC) approved a spot-price exchange-traded fund (ETF), aligning Bitcoin with conventional financial products. A wide range of companies, institutional investors, and nations have begun hoarding Bitcoin to hedge against inflation.
In contrast, Shiba Inu is an ERC-20 token built on the Ethereum blockchain (Ethereum 10.18%), utilizing a more eco-friendly proof-of-stake (PoS) process. PoS does not support mining but allows for smart contracts that can facilitate decentralized apps (dApps), non-fungible tokens (NFTs), and other crypto assets. Tokens in PoS systems can be “staked” or locked up for rewards.
Though Shiba Inu was developed on Ethereum, it operates on its Layer 1 (L1) network, meaning it doesn’t easily allow for the creation of individual apps. Initially, 1,000 trillion tokens were created, but this has been reduced to around 589.5 trillion through periodic token destruction. However, it seems unlikely that a Shiba Inu ETF application will be submitted to the SEC anytime soon.
What are the arguments for and against Shiba Inu?
Shiba Inu’s potential growth is tied to Shibarium, a Layer 2 (L2) network introduced in 2023. Shibarium can quickly process transactions and reduce gas fees by batching them off-chain, while also supporting Ethereum-compatible smart contracts and dApps. In order to attract developers, Shiba Inu’s team has provided new tools, subsidized gas fees, and tightened staking security. However, it did face a significant security breach in September.
Supporters believe that as Shibarium gains more developers and users, Shiba Inu’s price will stabilize and possibly rise. Still, it faces tough competition from other Ethereum-based L2 networks like Arbitrum (Code: ARB) and Polygon (Crypto: Matic), as well as the faster and cheaper Solana (Code: SOL).
If Shiba Inu lacks unique features, attracting potential investors may be a challenge. Even if lower interest rates lead to a renewed interest in cryptocurrencies in the coming year, Shiba Inu might lag behind as investors flock to blue-chip options like Bitcoin and Ether, similar to trends observed over the past year.
Could there be a case for choosing Shiba Inu over Bitcoin?
Some investors might feel that Shiba Inu has more potential for growth because it has underperformed in comparison to Bitcoin. Still, in the crypto landscape, many so-called underdogs often get left behind. Their growth potential is difficult to measure, especially considering the developer ecosystem’s current limitations. Consequently, Shiba Inu might remain in Bitcoin’s shadow for now. While Bitcoin appears to have a clear path ahead, Shiba Inu might struggle to keep pace with more promising PoS cryptocurrencies like Ether and Solana.
