One of the hottest cryptocurrencies this year has been Shiba Inu (SHIB -0.73%). Year to date it has risen by 130%, and the meme coin looks to be alive and well with retail investors. But with such impressive gains already in 2024, is it too late buy the digital currency? Or is the coin just getting started, and could greater interest in the broader crypto market lead to further momentum for Shiba Inu?
The number of companies accepting Shiba Inu has risen significantly in recent years
One of the reasons Shiba Inu has grown in prominence with crypto investors is that there has simply been more acceptance of the cryptocurrency. Meme or not, more places are accepting it, and that's a positive development for Shiba Inu holders because it may lead to greater demand for the coin.
According to data from Cryptwerk, there are 935 merchants in the online crypto directory's database that accept Shiba Inu as a form of payment. That's 16% more than the 806 merchants who accepted it a year ago, and a 46% increase from two years ago.
There are more than 9,400 merchants who accept Bitcoin (BTC 0.14%), according to the website, suggesting that Shiba Inu still has long way to go in being as popular as the top cryptocurrency. But it's certainly moving in the right direction.
Volatility for Shiba Inu is inevitable
Nearly 92% of the crypto wallets that hold Shiba Inu hold less than $1,000 of the meme coin. With Bitcoin, that percentage is a bit lower at 84%. This suggests that Shiba Inu is more heavily skewed toward smaller investors than Bitcoin is. But the meme coin's price movements may actually be due to larger investors.
Shiba Inu has a high whale concentration of 63%, according to CoinMarketCap. Whales are wallet addresses that hold more than 1% of the coin's circulating supply. And the higher the percentage, the more potential volatility there is, because a small number of whales can have a large impact on the coin's price. In the case of Bitcoin, the whale concentration is just 1.5%.
But there hasn't been as much volatility of late. In early March, trading volumes for Shiba Inu were high, often totaling more than $2 billion and that's when the coin was rallying. Lately, the coin has been slowing down and declining, and that has been while volumes have also been lower (below $1 billion per day). This could be further proof of the heavy impact that whales have on the coin. And the danger for investors is that price movements can be sudden, and come without much warning.
Should you buy Shiba Inu?
Shiba Inu's valuation could take off at a moment's notice in either direction, and that's what can be both risky and exciting about the meme stock -- its fluctuations can sometimes be unpredictable. And for that reason, it's certainly possible for Shiba Inu's valuation to rise higher this year despite its impressive gains.
The danger for crypto investors is that there isn't a fundamental reason to expect that the cryptocurrency will rise in value. The main investing thesis resides around the greater fool theory and the expectation that someone will buy it at a higher price. But this is purely speculative. If you're bullish on crypto, you're likely better off simply investing in Bitcoin or buying stocks with exposure to crypto. Shiba Inu is an ultra-risky investment that is a downright gamble given its vulnerability to large movements as a result of whale transactions.
