When it comes to blockbuster returns, cryptocurrencies have spent the last two years dropping the jaws of even the most experienced investors. But perhaps none were as shocking as Shiba Inu ( SHIB 0.49% ), which between Jan. 1, 2021, and Dec. 31, 2021, gained a whopping 43,800,000%.
In other words, a tiny $2.29 investment held between those exact dates would have made you a millionaire.
Naturally, investors are hunting for a repeat of that life-changing return, and since Shiba Inu has lost 74% of its value since reaching its all-time high in October 2021, some might wonder if it’s time to buy ahead of another spike.
Developers of the controversial meme-coin have turned their attention to the metaverse, which could give it new life. While the metaverse may well offer an opportunity to build a new use-case for Shiba Inu, and it might even be a reason to buy, here’s why it likely won’t resurrect its languishing price.
The metaverse is big, broad, and complicated
The metaverse describes a collection of virtual worlds where occupants exist as avatars of themselves, and its potential is seemingly endless. Meta Platforms ( FB -1.47% ), which owns Facebook, Instagram, and WhatsApp, thinks it could be the next generation of social networking, and in 2021 that company burned over $10 billion on development initiatives.
Meta Chief Executive Officer Mark Zuckerberg believes building the metaverse will take a collaborative effort from social media companies, software companies, and even semiconductor and hardware makers, like Nvidia.
Earlier in 2022, Shiba Inu developers announced the Shiberse. It’s expected to serve as a digital meeting place for the Shiba Inu token, games, and the wider community, with speculation it could also include virtual land and non-fungible tokens (NFTs). If transacting on these virtual items requires the Shiba Inu token exclusively, then that’s a good argument for it to rise in price once again.
But since the metaverse will be a vast collection of virtual worlds that individual companies might create for their own purposes, it means the Shiberse probably won’t be unique, especially if all worlds are interoperable. It places doubts about whether there’s any real reason for users to utilize the Shiberse and therefore adopt the Shiba Inu token, just like in the real world where only 648 mostly obscure businesses currently accept it as a form of payment.
So, even though the metaverse is expected to be a $1.6 trillion opportunity by the end of this decade, it’s unclear whether Shiba Inu’s contribution to the initiative will be enough to differentiate it from everything else out there.
But there are other challenges for Shiba Inu
In the here and now, the broader crypto sector is facing a torrent of headwinds, and as a speculative meme token, Shiba Inu’s ability to withstand them might be less robust than mainstream coins like Bitcoin or Ethereum.
The U.S. government is looking to regulate cryptocurrencies from a few different angles. As of next year, cryptocurrency brokers may be required to report their customers’ transactions to the Internal Revenue Service (IRS), meaning investors who sell, exchange, or spend their tokens might be hit with a tax bill. Not only is this inconvenient, but it strikes at the very core of the industry’s decentralized, anonymous features that have made it so popular.
Additionally, the Securities and Exchange Commission (SEC) is examining whether most cryptocurrencies should be classed as securities, which would bind brokers to strict audit and compliance standards, minimizing the risk of market manipulation. While this is a good thing, it could result in higher transaction fees as brokers seek to cover the associated costs.
These moves by the government could deter investors from pouring money into cryptocurrencies like Shiba Inu.
Math makes a repeat of 2021 impossible
Even if the Shiberse metaverse project is a home run, it still won’t be enough for Shiba Inu to repeat its lofty 2021 return.
If the token were to rise 43,800,000% from its current price of $0.000024, it would arrive at $10.07 per token. Considering there are 589 trillion Shiba Inu tokens in circulation, that would result in a total market value of $6 quadrillion.
For context, that’s 70 times greater than the $84.7 trillion in global gross domestic product (GDP) in 2020. But that’s not even the most absurd fact.
That enormous figure is 13 times greater than all of the recorded wealth around the world right now, which stands at $431 trillion. Put simply, if every person, business, and government converted all of their cash and assets to Shiba Inu tokens, it would only warrant a price of $0.73 — that’s a long way from $10.07.
So, while the metaverse could give Shiba Inu a lift in value, it certainly won’t deliver a repeat of its 2021 returns. In fact, given the variety of opportunities in the new virtual world, it’s unlikely Shiba Inu will catch a meaningful boost at all.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.