Sometimes it’s better to be lucky than good; investors in meme-tokenized cryptocurrencies like Dogecoin and Shiba Inu reaped massive returns during the height of the crypto bull market in 2021. But the good times are over for now; Rising interest rates dampened investor appetite for riskier assets like crypto, and these two coins accounted for a large portion of those gains.
There is hope for a market recovery in 2023, which could give investors the confidence to venture into altcoins again. But don’t rush into these meme currencies; consider the market landscape and this important information before putting your hard-earned money to work.
Adoption drives demand, which drives value
The digital currency function is the basic purpose of many tokens. A space must have a function, why else would anyone want it? It would be like receiving your paycheck but not being able to use it. Fiat currency has value because it is accepted almost everywhere, even in most foreign countries.
Lack of adoption is the biggest obstacle for Dogecoin and Shiba Inu. Some merchants accept Dogecoin and Shiba Inu, but you usually can’t use them to pay for groceries. You can’t hire many people who will accept Dogecoin as payment. At this point, both pieces are more news than anything else.
The rise these coins experienced in 2021 was driven by frenzied excitement that mimicked the demand effect as they were very popular for a short period of time. However, it ended up being a game of musical chairs; the music stopped and investors who had bought near the top and couldn’t sell fast enough saw most of their gains disappear.
Unless the market becomes wildly speculative again, it may take some adoption to create real demand for these coins, and none of them have much real-world use yet.
Mathematics plays against both coins
The supply is the other factor that affects the value of the currency. You can see below that inflation took off as the total supply of US dollars increased during the pandemic. The increase in the number of US dollars has reduced their purchasing power.
The same concept applies to digital currencies; one of the attractions of bitcoin is that there will only be a maximum of 21 million coins. An increase in demand would only increase their value as there are only a limited number of bitcoins. In contrast, the supply of Dogecoin is unlimited, and 10,000 DOGE enter circulation every minute. The Shiba Inu was built with a maximum supply of 1 quadrillion, over 47 times the total money supply in the United States! There are approximately 589 trillion tokens in circulation today, making it highly unlikely that Shiba Inu will ever be able to sustain a meaningful price per token.
Limited use and abundant supply make Dogecoin and Shiba Inu cryptocurrencies of unlikely utility or long-term value. Both of these currencies are memes and should be treated as such, only bought with money you have no problem losing.
Consider this top altcoin instead
But this bear market may be a buying opportunity; consider Ethereum over Dogecoin or Shiba Inu. Ethereum has the highest market capitalization of all altcoins and is the most widely used blockchain, hosting around 3,000 decentralized applications. The coin is down 75% from its peak, but the thousands of applications running on the Ethereum blockchain give it a better chance of mainstream adoption as the crypto industry grows and matures.
Bear markets don’t happen every day, and you don’t want to waste the opportunity to hunt fluff and ignore high quality assets that are for sale. Keep your investments in meme currencies like Dogecoin and Shiba Inu to a minimum, and focus on Ethereum and other cryptos with a realistic chance of real long-term value.
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