Shiba Inu (CRYPTO: SHIB) has taken investors on an incredibly wild ride since it first hit the market in August 2020. While the token trades down roughly 87.5% from its lifetime high, its price is still up more than 19,000,000% from its debut and has climbed 32% year to date.
Is the controversial meme-powered cryptocurrency gearing up for the next legs of another massive run, or are bullish investors barking up the wrong tree? Read on for a look at bullish and bearish scenarios and dynamics that could shape the SHIB token's future.
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Bull case: New fundamentals and positive crypto-market momentum
Shiba Inu has a dedicated, enthusiastic army of investors and supporters behind it, and efforts are being made to further strengthen community support surrounding the token. The team behind Shiba Inu is gearing up to launch a metaverse.
"SHIB: The Metaverse" will allow users to buy and maintain plots of virtual land and interact with other players. In order to name the plots of land, SHIB tokens will need to be burned. This will reduce the total coin count and could create positive pricing trends by making the cryptocurrency more scarce.
The Shiba Inu team has also launched the beta for Shibarium, its Layer 2 blockchain platform built on top of the Ethereum network. Shibarium is designed to speed up transaction times and reduce transaction costs, pave the way for new development projects, and facilitate SHIB token burning. It will also use related tokens in the SHIB family as currencies to power its operations, which can then be exchanged for SHIB. If Shiba Inu's layer-2 solution attracts a significant number of projects and helps them scale, this could create increased demand for the SHIB token.
In addition to a fundamental-value case that seems to be improving, SHIB could also continue benefiting from positive momentum in the broader crypto space. The cryptocurrency market has made strong gains in the year's first quarter, and it appears that some weakness in the banking sector may be pushing investment dollars into crypto. If the crypto market continues to enjoy bullish momentum, it's reasonable to think Shiba Inu's token will benefit from the trend.
Bear case: New projects might not amount to much
While SHIB's fundamental valuation case appears to be improving with new projects on the horizon, the token remains a highly speculative investment at its core. Until the metaverse and Layer 2 offerings arrive and show signs of traction, SHIB remains a hype-powered meme token first and foremost.
It's still possible that the metaverse could function to promote SHIB or otherwise create conditions that work to send the token's price higher, but it's far from certain the upcoming virtual world will prove to be a positive catalyst for the popular meme-themed token. Personally, I don't think that what's been shown of SHIB: The Metaverse looks very impressive. The project was first announced more than two years ago, and the Shiba Inu team only recently revealed an official trailer showing off locations in the game. Opinions will vary, but I don't think what was shown provides much indication that the metaverse offering will be a game changer.
The Shibarium Layer 2 platform may have greater promise, but again, it's not clear that it will move the needle for SHIB in a meaningful way. The Layer 2 implementation should make it possible to improve transactions for the token and may spur new development projects built around the Shiba Inu ecosystem, but the SHIB token is primarily a speculative investment vehicle, not a currency.
While SHIB has new use cases and functionalities emerging, it's not clear that these things are actually addressing demand or stand a good chance of creating new demand. After being hyped for years, it's entirely possible that SHIB: The Metaverse and Shibarium will wind up being flops.
Should you buy SHIB?
The Shiba Inu cryptocurrency is a very high-risk investment, but it's possible that it could deliver explosive returns from current pricing levels. If you're willing to take on outsized risk and are optimistic about upcoming projects and features or bullish momentum in the broader crypto space, buying the token could be the right move.
Personally, I don't think the metaverse or Layer 2 features will wind up being significant positive pricing catalysts, and betting on broader market momentum doesn't strike me as a smart move right now. As such, I'm staying on the sidelines when it comes to the SHIB token.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Ethereum. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
