We’ve reached the copycat investment stage of cryptocurrencies. Since Dogecoin (CCC:DOGE-USD) has been a huge hit, folks decided to bid up a supposed Dogecoin killer, Shiba Inu (CCC:SHIB-USD).
An anonymous entity created the Shiba Inu last year. Shiba Inu is a direct play on the Dogecoin phenomenon, as the Shiba Inu is the breed of dog featured on the Dogecoin token. Traders have taken a liking to Shiba Inu, hoping it repeats Dogecoin’s incredible run.
Indeed, Shiba Inu produced tremendous gains earlier this year. With crypto prices back on the upswing, there’s the possibility that it will take off once again.
However, most traders should be cautious.
Making Sense Of Shiba Inu’s Low Price
The main appeal of Shiba Inu is its rock bottom price. As of this writing, the token is selling for 0.00000733 each. For $1, you could buy more than 135,000 Shiba Inu tokens. With less than $7.50, you could own a million of them. In theory, if Shiba Inu ever exploded in value, this could become a fortune.
Dogecoin infamously took off from a fraction of a penny to as high as 70 cents each. It wouldn’t have been difficult to accumulate tens or hundreds of thousands of Dogecoin when it traded at those prices. When they hit 70 cents, however, suddenly a 100,000 Dogecoin would represent a windfall and potentially be a life-changing asset.
So why not buy up 1 million Shiba Inu and hope for the best? Simply put, it’s vanishingly unlikely that Shiba Inu will ever reach 1 cent, let alone any higher. The total maximum supply of Shiba Inu tokens is 1 quadrillion. That’s 1,000 trillion of them. Written out, it looks like this: 1,000,000,000,000,000 Shiba Inu tokens.
If Shiba Inu reached 1 cent, it would have a market capitalization of $10 trillion, or four times as much as Apple (NASDAQ:AAPL). That’s not going to happen.
The math on buying 1 million tokens at a low price may be alluring. But investors must resist the temptation to throw money simply at any longshot. The vast majority of low-priced assets trade as such because they simply aren’t worth much if anything.
Read the bullish articles on Shiba Inu. It’s all about the potential gains if the meme crowd adopts it. But there’s far less talk about fundamentals or the currency’s actual use cases, because there just isn’t much there.
A bet on SHIB-USD or another ultra-low priced token looks more like buying lottery tickets than investing. Sure, some low-priced tokens may pump in value. But most will never go anywhere. And capital tied up in longshot bets is capital that isn’t invested in real stocks or cryptocurrency projects that could grow steadily over time.
There’s another more prudent way to get 500% or 1,000% style upside in investing if you’re right: options. You can purchase long-dated call options, say, for the year 2023. These are available for almost all major publicly traded companies.
Pick one that you’re confident in, something strong with a great growth profile. Load up call options and wait. If the stock rallies significantly, the option should deliver a multi-bagger return.
It’s still risky, to be sure. Don’t buy options with money that you can’t afford to lose. However, options are way more sensible than buying some dog-inspired crypto-token in hopes that other people will bid it up on a lark.
Shiba Inu Bottom Line
It’s not particularly likely that the SHIB-USD token will ever develop much practical use in the real world. As such, profits from trading the token will be a zero sum game; for one trader to win, another has to lose. It’s appealing to think about buying a huge amount of some token and having the price rocket up. The odds are, however, badly stacked against the average trader who is late to a party like this one.
People might say that something like Shiba Inu is worth a little “fun money” bet. But why not take that same fun money and invest in a high-risk high-reward company or stock option that has an economic basis to actually be successful in the future?
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.