on the crypto
Shiba Inus (quotation SHIB) hit nearly all investors in 2021 after speculators took it to a 43.800.000% gain in the year. This is one of the largest returns in the history of finance: a perfectly timely investment would have turned $ 3 into over $ 1 million.
But the tide has since gone out and Shiba Inu hasn't evolved to offer real use cases. As a result, its value has dropped 64% so far in 2022. Despite the steep drop, here are three big reasons why I wouldn't be a buyer yet.
1. The Shiba Inu is not regulated
The first reason to stay away from Shiba Inu - and this is true for most cryptocurrencies - is that it is absolutely not regulated. Ironically, this is one of the reasons some investors choose to own it, because they believe it keeps them outside the traditional monetary system. But this approach can have significant consequences.
For example, if Shiba Inu tokens are lost or stolen, there is virtually no recourse for the holder. On the other hand, up to $ 250.000 of cash in a US bank account is automatically insured by the Federal Deposit Insurance Company (FDIC); in other words, they are guaranteed by the government should something happen.
Holders of TerraUSD, a stablecoin that recently lost nearly all of its $ 18 billion valuation, are likely to have appreciated a government-backed initiative to recoup their losses.
2. Regulations are on the way
You might think this contradicts the first point, but the second reason to avoid Shiba Inu is that regulation is inevitable. After a series of high-profile crashes in cryptocurrency markets (like the one cited above), the US government is more aggressively pursuing new laws to protect investors.
Owners of Shiba Inu (and cryptocurrencies in general) will soon lose the ability to remain anonymous, as their brokers and exchanges will be obliged to report all client trading activities to the Internal Revenue Service for tax purposes starting on 2023. Additionally, most cryptocurrencies likely fall under the legal definition of a financial security, which could soon place a heavy compliance burden on brokers and exchanges, resulting in increased trading costs for clients.
Put simply, more regulation is a net benefit to consumers, but it would also eliminate many of the reasons people want to own tokens like Shiba Inu. If the subset of the population that currently finds Shiba Inu attractive suddenly no longer finds it, it could be the final nail in the meme token.
3. Neither consumers nor companies want to use Shiba Inu tokens
The ultimate goal of most cryptocurrencies is to become a more performing means of payment than traditional money. In theory, this would ensure a sustained increase in prices because people would constantly transact with the tokens, incentivizing consumers and businesses to own them. So far, however, not even the cryptocurrency market leader Bitcoin has achieved mass adoption and Shiba Inu is far behind.
About 7.879 companies accept Bitcoin as payment worldwide, but just 659 accept Shiba Inu, and these are mostly small and obscure merchants. Given Shiba Inu's significant return in 2021, followed by its subsequent collapse in 2022, how many companies could manage their cash flow if they transacted in such a volatile currency? Probably none. As a result, Shiba Inu's merchant base is unlikely to grow materially anytime soon.
