Are there any valid reasons for buying the meme coin instead of the blue chip leader?
Bitcoin (BTC 0.98%) and Shiba Inu (SHIB 1.38%) generally attract different types of investors. Bitcoin, the world’s largest cryptocurrency with a market cap of $2.43 trillion, is a “blue chip” token valued by its scarcity and often compared to gold.
Shiba Inu, which has a market cap of $7.2 billion, is a meme coin that was originally created as a parody of Dogecoin (DOGE 4.99%) — which itself was a parody of Bitcoin. Over the past 12 months, that canine-themed coin shed about 30% of its value as Bitcoin’s price surged 95%.
Image source: Getty Images.
For most investors, it might make more sense to buy Bitcoin than Shiba Inu. But let’s dig deeper and see if there’s a valid contrarian case for buying Shiba Inu over Bitcoin.
The differences between Bitcoin and Shiba Inu
Bitcoin is still mined with the energy-intensive proof-of-work (PoW) mechanism. Its mining difficulty climbs every four years with scheduled “halvings” that cut its rewards in half, and 19.9 million of its maximum supply of 21 million tokens have already been mined. That programmed scarcity makes it similar to gold or other hard assets.
The Securities and Exchange Commission (SEC), noting Bitcoin’s similarity to mainstream commodities, approved its first spot price exchange-traded funds (ETFs) last January. Many companies, institutional investors, and even countries have been accumulating Bitcoin as a hedge against inflation.
Shiba Inu is an ERC-20 token that was minted on Ethereum (ETH 5.88%), which runs on the energy-efficient proof-of-stake (PoS) mechanism. PoS blockchains don’t support mining, but they support smart contracts — which can be used to develop decentralized apps (dApps), non-fungible tokens (NFTs), and other crypto assets. PoS tokens can also be “staked,” or locked up to earn interest-like rewards, on their blockchains.
Since Shiba Inu was minted on Ethereum and still runs on its Layer-1 (L1) blockchain, it doesn’t natively support the development of its own apps. Its entire supply of 1 quadrillion tokens was minted upon its launch, while its periodic burns (which permanently remove its tokens from circulation) have reduced its circulating supply to roughly 589.5 trillion tokens. But for now, it seems unlikely that any crypto firms will submit applications for Shiba Inu ETFs to the SEC.
What are the bull and bear cases for Shiba Inu?
Shiba Inu’s future growth is pinned to Shibarium, its Layer-2 (L2) network that was launched in 2023. By bundling together transactions and processing them off-chain, Shibarium can provide higher transaction speeds and lower gas fees than Ethereum’s L1 blockchain. It also fully supports Ethereum-compatible smart contracts and the development of dApps and tokens. To draw more developers to Shibarium, Shiba Inu’s team has been adding new developer tools and resources, developer-subsidized gas fees, and a revamped staking model with tighter security protocols. However, its network still experienced a significant security breach this September.
The bulls expect Shiba Inu’s price to stabilize and rise as Shibarium attracts more developers and dApp users. But it also faces stiff competition from other Ethereum-based L2 networks like Arbitrum (CRYPTO: ARB) and Polygon (CRYPTO: MATIC), as well as faster and cheaper L1 PoS blockchains like Solana (CRYPTO: SOL).
Without any standout features, Shiba Inu could struggle to attract more investors. Even if declining interest rates ignite a new “crypto summer” over the next 12 months, Shiba Inu could be left behind — as it was over the past year — as the bulls rush toward blue chip tokens like Bitcoin and Ether.
Is there a contrarian case for buying Shiba Inu over Bitcoin?
Some investors might think Shiba Inu has more upside potential than Bitcoin because it’s a distant underdog. But in the crypto market, a lot of the underdogs get left behind because they can’t be gauged by their scarcity of the growth potential of their developer ecosystems. That’s why Shiba Inu could underperform Bitcoin for the foreseeable future. Whereas Bitcoin has clear catalysts on the horizon, Shiba Inu could get lost in the shuffle and struggle to keep up with more promising PoS tokens like Ether and Solana.
Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and Solana. The Motley Fool recommends Polygon. The Motley Fool has a disclosure policy.
Source link
