bitcoin (btc -2.90%) It is the largest cryptocurrency in the world. It has a market capitalization of $1.3 trillion at the time of writing, making it about half of the total value of the entire crypto market ($2.4 trillion).
It has posted a gain of around 50% in 2024 so far and hit a new high of $69,171 yesterday. Cryptocurrency benefits from approval of Bitcoin exchange-traded funds (ETFs), which are creating new sources of demand. Furthermore, the pessimism towards cryptocurrencies that took hold in 2022 appears to have eased and investors are once again feeling comfortable with the asset class.
Some of the stocks in the meme token segment of the crypto industry are further evidence of a growing appetite for risk. For example, Shiba Inu (SHIB -16.72%) has recorded a return of over 200% in 2024 (as of March 5), outperforming Bitcoin.
Shiba Inu rose to fame thanks to a staggering 45,278,000% gain in 2021, which could have turned a perfectly timed investment of just $3 into over $1 million. It has since fallen 75% from its all-time high (even after accounting for its strong gain this year), but could this be the start of another historic run?
Investors are once again flocking to the cryptocurrency industry
The year 2022 was arguably the most turbulent in the history of the crypto industry. A series of high-profile implosions shook investor confidence, from the uncoupling of the Land USD stablecoin to the collapse of FTX, one of the largest crypto exchanges in the world.
Combined with broader economic obstacles such as Soaring inflation and rising interest ratesBitcoin was trading 76% below its late-2022 high. Even Bitcoin shares Coinbasearguably the most regulated crypto exchange in the world, it lost 86% of its value that year.
The aforementioned failures cleansed the crypto industry of the exuberance of previous years that gave rise to fraud and bad actors. The prosecution of FTX founder Sam Bankman-Fried and even Binance's Changpeng Zhao in 2023 signaled that regulators are willing to defend investors. That restored some confidence in the asset class.
With the stock market staging a powerful rally in 2023, sentiment towards risk assets became overwhelmingly positive, which was the green light investors needed to return to major cryptocurrencies like Bitcoin. The speculative end of the market, where Shiba Inu resides, was not ready to move forward and failed to take off last year.
However, risk assets have continued to gain momentum in 2024 and Shiba Inu is finally participating in the rally.
Shiba Inu faces structural challenges
There used to be hope that CRYPTOCURRENCIES They would be used like traditional currencies. In that scenario, consumers and companies would have to adopt them, which would continue to increase their value.
However, of the 334 million registered companies worldwide, only 9,393 accept Bitcoin as payment. Shiba Inu is doing even worse, with only 920 companies on board.
Many investors maintain that Bitcoin is a store of value similar to gold, and that's not unreasonable considering it has limited supply and is the most valuable of all cryptocurrencies. Shiba Inu, on the other hand, is in great supply and, without widespread adoption as a payment mechanism, is only useful as a vehicle for speculation.
Its supply problem will act as an obstacle to future price increases. There are 589.3 trillion tokens in circulation, so it is trading at a price of just $0.000032 despite having a market capitalization of $19 billion.
The community is making an effort to cut the supply through fire Shiba Inu chips, but could be a useless exercise.
Image source: Getty Images.
Investors should not rush to buy Shiba Inu
It may be tempting to buy a meme token like Shiba Inu, especially given its historic million-dollar streak in 2021. But history is no indicator of future performance, and it is impossible to time speculative ebbs and flows in any asset.
Those who bought Shiba Inu at the height of the 2021 frenzy have lost three-quarters of their money. And who knows: its current price could be the maximum for this cycle.
Investors who want exposure to cryptocurrencies might prefer to stick with the leader, Bitcoin. Since there is a wide variety of ETFs to choose fromOwning it has never been so simple.
