Meme-coin mania has led to big gains for Shiba Inu. But are they sustainable heading into next year?
As the result of meme-coin mania in the crypto market, Shiba Inu (SHIB 0.51%) continues to outperform Bitcoin (BTC 2.71%) this year. Yes, that's right. A dog-themed meme coin with no obvious utility is outperforming a digital asset that has been called "digital gold" and "the future of money." Shiba Inu is up 80% in 2024 compared to 55% for Bitcoin.
But just how sustainable is this performance, and what will Shiba Inu be worth in 2025? To answer those questions, let's take a look at two possible scenarios.
Best-case scenario
Given the eternal optimism of meme-coin investors, let's start with a best-case scenario for Shiba Inu. This assumes that meme-coin mania is here to stay; Bitcoin will soar in value as a result of its recent halving; and Shiba Inu will find a way to transform itself from a pure meme coin into more of a utility coin.
In this best-case scenario, Shiba Inu could appreciate in price at roughly the same pace as Bitcoin. During previous Bitcoin halving cycles, this has been the pattern. The logic is simple: Bitcoin, as the largest market-cap crypto, tends to drag along all other cryptos in any rising market. As Bitcoin goes, so goes the crypto market.
It's really just a matter of finding a Bitcoin price forecast for 2025 that you're comfortable using, and then assuming that Shiba Inu will track the performance of Bitcoin over the next 12 months. So, for example, research and brokerage firm Bernstein is forecasting that Bitcoin could hit a price of $200,000 in 2025. Based on today's Bitcoin price of $65,000, that's a gain of 200%. Using a few back-of-the-envelope calculations, that leads to a $32 billion market cap for Shiba Inu and an implied price of $0.00005 per token.
From my perspective, though, this approach is not very intellectually rigorous. It does not involve any fundamental analysis of any kind; it does not consider the true correlation between Shiba Inu and Bitcoin (which is definitely not 1:1); and it assumes that the Bitcoin halving cycle of 2024 will largely repeat the same pattern as the Bitcoin halving cycle of 2020.
Worst-case scenario
The worst-case scenario is what happens when you start to stress-test some of the overly optimistic assumptions from the best-case scenario. For example, take the assumption that the Bitcoin halving cycle of 2024 will largely repeat the same pattern as the Bitcoin halving cycle of 2020. That is unlikely to be the case, given the diminishing returns for each new halving cycle.
Or, for example, let's challenge the assumption that investors will continue to perceive Shiba Inu as one of the top meme coins to buy during the current period of meme-coin mania. That might have been true back in 2021 when the crypto market last saw a bout of this mania. But back then, Shiba Inu was one of just a handful of meme coins. Today, there are literally tens of thousands of meme coins.
Image source: Getty Images.
And here's a scary thought: Shiba Inu may no longer be the top dog. Shiba Inu is up 80% for the year, but dog-themed meme coin dogwifhat (WIF 3.03%) is up 1,300% this year. Or how about a frog-themed meme coin? Pepe (PEPE 4.98%) is up 800% this year. Given these numbers, it's easy to see how investors could start to move their money out of Shiba Inu and into faster-growing meme coins.
And, finally, what about the key blockchain metrics used to evaluate Shiba Inu? We keep hearing about all the activity happening on the Shiba Inu blockchain, and how it's gaining traction with users and developers. But total value locked (TVL) for Shiba Inu is a microscopically small $1.89 million. That ranks #143 among all blockchains and tells me that the "utility" thesis for Shiba Inu is still very weak.
So, in a worst-case scenario, I could see Shiba Inu losing considerable value heading into 2025. Right now, Shiba Inu has a market cap of nearly $11 billion. The next-closest meme-coin competitor, Pepe, has a market cap of $5 billion. If these two meme coins swap places, then Shiba Inu could theoretically lose 50% of its value.
Should you be investing in meme coins?
It is easy to understand the allure of investing in meme coins. But turning $1,000 into $1 million by investing in the right meme coin is a lot harder than it sounds. It's also too speculative and too risky for any kind of long-run investing strategy. Unfortunately, it could be too late to become a Shiba Inu millionaire.
As a result, I can not recommend an investment in Shiba Inu at this time. If you are confident that Shiba Inu can track the performance of Bitcoin over the next 12 months, then why not just buy Bitcoin?
Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
