This has been a bonanza 12 months for cryptocurrency traders, with the mixed market hovering 185% to $2.2 trillion 12 months so far. Meme coins like Shiba Inu (CRYPTO:SHIB) and Dogecoin (CRYPTO:DOGE) led the bull run. However each appear to be dangerous bets for 2022. Let’s discover why their disastrous fundamentals and weak aggressive moats might set traders up for failure within the new 12 months.
Up by over 3,000% in 2021, Dogecoin was one of many 12 months’s prime performers. That is regardless of falling dramatically from its all-time excessive of $0.74 achieved in March (now it is price $0.16 per coin). And sadly for traders, Dogecoin’s collapse appears set to proceed in 2022 due to its weak fundamentals and concentrated possession.
Not like rivals together with Ethereum and Solana, Dogecoin does not enable decentralized applications (dApps), that are autonomous applications that self-execute sensible contracts to supply companies on a blockchain. This dramatically lowers its potential makes use of. And to make issues worse, its built-in inflation means it additionally performs poorly as a retailer of worth.
There are presently nearly 133 billion items of Dogecoin in circulation, and the quantity is programmed to develop by 5 billion yearly — perpetually — placing downward stress on its value over the long run.
However Dogecoin’s issues do not finish there. In accordance with coinmarketcap.com, 10 holders management 43% p.c of all of the cash in circulation, giving them large affect over the asset’s value. In order dangerous as Dogecoin’s present collapse is, the scenario might get a complete lot worse if the whales swim away.
2. Shiba Inu
Like Dogecoin, Shiba Inu is one other hype-driven cryptocurrency that loved a bull run in 2021 earlier than crashing within the latter a part of the 12 months. Down a jaw-dropping 62% from its all-time excessive of $0.00008616 reached in late October, Shiba Inu is susceptible to continued draw back due to its low utility and speculative investor group.
The rally began when Elon Musk tweeted about his not too long ago adopted Shiba Inu breed of pet in October. However regardless of the hype, the token is not very helpful. Its excessive volatility makes it a poor retailer of worth and dangerous medium of alternate, so most Shiba Inu traders are likely to have a short-term perspective (including to the coin’s volatility).
In accordance with knowledge from coinbase.com, the standard Shiba Inu holding time is 40 days (in comparison with 70 and 75 days for Bitcoin and Ethereum, respectively). The asset additionally suffers from concentrated possession, with 10 accounts controlling a whopping 64% of the availability, giving whales the flexibility to crash the value by promoting their stakes.
Hype does not final
Dogecoin and Shiba Inu are meme cash with poor fundamentals, so their traders depend on the “greater fool” theory to generate income. This idea suggests you possibly can revenue from a low-quality asset as a result of another person (the larger idiot) shall be prepared to purchase it for extra sooner or later.
However ultimately, the hype fades. And the sellers start to outnumber the consumers, resulting in a crash. New traders ought to keep away from Dogecoin and Shiba Inu in 2022, so they are not left holding the bag.
This text represents the opinion of the author, who might disagree with the “official” suggestion place of a Motley Idiot premium advisory service. We’re motley! Questioning an investing thesis — even one among our personal — helps us all assume critically about investing and make choices that assist us turn out to be smarter, happier, and richer.