Bitcoin (CRYPTO: BTC), the largest cryptocurrency by market capitalization, has increased by 53% this year. Its market cap is currently $1.3 trillion, representing over half of the total crypto market, which stands at $2.4 trillion.
The cryptocurrency sector faced a tough bear market in 2022 after the collapse of several high-profile projects and exchanges. However, Bitcoin’s price has surged recently, nearing its record high due to renewed investor optimism.
Shiba Inu Outperforms Bitcoin
The positive sentiment in the crypto market has extended beyond Bitcoin. Shiba Inu (CRYPTO: SHIB) has experienced an impressive year-to-date gain of 79%, outpacing Bitcoin’s performance. This isn’t the first time Shiba Inu has outperformed Bitcoin; the meme token delivered significant gains in 2021, making headlines in the financial world.
However, investors should be cautious about expecting Shiba Inu to continue outperforming Bitcoin.
Bitcoin’s Strength Versus Speculative Tokens
Bitcoin operates as a decentralized cryptocurrency, meaning it is not controlled by any individual or government. Its supply is capped at 21 million coins, and it functions on a reliable blockchain system. Many crypto enthusiasts view Bitcoin as a viable alternative to traditional currencies, as its supply cannot be easily manipulated or inflated.
Despite its potential, Bitcoin’s adoption remains limited. According to Cryptwerk, only 9,224 businesses globally accept Bitcoin as payment for goods and services. This limited acceptance reduces the incentive for people to own Bitcoin. Additionally, Bitcoin’s volatility makes it challenging for merchants to manage cash flow. The currency’s price can fluctuate dramatically, as seen in 2022 when Bitcoin dropped over 50% in value.
Consequently, many investors consider Bitcoin more as a store of value, akin to digital gold. This perception gained traction when the U.S. Securities and Exchange Commission approved Bitcoin exchange-traded funds (ETFs) earlier this year. Numerous ETFs have entered the market, providing investors with a regulated way to invest in Bitcoin.
These ETFs have generated new demand for Bitcoin, likely contributing to its near-record high trading price. In contrast, the speculative side of the crypto market has not fared as well. Although Shiba Inu is up more than Bitcoin in 2024, it remains down 78% from its all-time high set in 2021.
Limited Growth Potential for Shiba Inu
Shiba Inu saw a staggering return of 45,278,000% between January 1, 2021, and December 31, 2021. An investment of $3 during that time could have turned into over $1 million. However, its subsequent decline highlights that the initial bull run was driven by speculation rather than solid fundamentals.
Currently, only 989 merchants accept Shiba Inu as payment, significantly fewer than those accepting Bitcoin. This low adoption rate is not surprising, given Shiba Inu’s high volatility and poor performance as a store of value. Therefore, a Shiba Inu ETF is unlikely to attract much demand or regulatory approval.
The development community is attempting to create new applications for Shiba Inu, but progress has been slow. Plans for a Shiba Inu metaverse were announced in 2022, promising a platform for enthusiasts to use their tokens in a digital environment, but it has yet to launch.
While developers introduced Shibarium last year—a Layer-2 blockchain solution to facilitate cheaper and faster transactions with Shiba Inu tokens—the initiative has not significantly increased adoption or improved token prices.
The reality is clear: Without widespread adoption, it will be challenging for Shiba Inu to create or maintain value. Speculation alone cannot sustain long-term returns, as shown by the token’s performance since 2021.
Bitcoin Offers a Safer Investment
Given the approval of ETFs, Bitcoin appears to be a safer investment compared to Shiba Inu. However, all cryptocurrencies are subject to speculation. This asset class does not generate revenue or earnings, so investors are primarily betting on future demand from others willing to pay higher prices.
For many, investing in high-quality stocks may be a wiser choice. The S&P 500 (SNPINDEX: ^GSPC) offers a collection of strong companies with a proven history of delivering reliable returns since its inception in 1957. Numerous ETFs make tracking its performance simple.
While the S&P 500 may not experience the astronomical gains that Shiba Inu did in 2021, it is also much less likely to suffer severe declines. Looking ahead 20 years, it is likely that investors who opt for the broader stock market will see better returns than those who invested in Shiba Inu, and potentially even Bitcoin.
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