Since the beginning of the 20th century, there has probably not been a more proven and true method of building wealth than putting your money to work in the stock market. Equities will not surpass housing, gold or bonds each year, but in the long run no asset class has come close to matching the average annual gain on equities.
In the short term is another story.
Since the low point of the corona pandemic in March 2020, the market value of cryptocurrencies has increased. Whereas benchmark S&P 500 has risen just over 100% since March 2020, the total value of all digital currencies has grown from $ 141 billion to almost $ 2.9 trillion. That is an increase of more than 20 times in about 20 months.
While interest in cryptocurrencies could hardly be higher, not all digital tokens are worth investing in. In fact, the following trio of cryptocurrencies are likely on their way to the dog house and should be avoided like the plague of November.
The first cryptocurrency investors should actively avoid is the hottest digital currency on the planet, Shiba Inu (CRYPTO: SHIB). This popular meme coin has received over 11,000,000% (not a typo!) since its debut on August 1, 2020.
Apparently everything has worked in Shiba Inus’ favor the past year and change. For example, an increasing number of cryptocurrency exchanges have listed SHIB for trading. This has helped push the number of unique wallets with Shiba Inu coins to over 925,000 and increased attention.
There is also the launch of ShibaSwap four months ago. This decentralized exchange allows “hodlers” to bet their coins to earn passive income, as well as helping to increase the liquidity of the SHIB community. The key here is that ShibaSwap could help extend the holding period for Shiba Inu investors.
But there are also some glaring issues with Shiba Inu that cannot be ignored. Without specific order:
- Shiba Inu offers virtually no tools in the real world. While the same could be said for 99.9% of all digital currencies, SHIB’s lack of use is particularly striking as it exceeds the top 10 in terms of crypto market value. Only 112 merchants accept SHIB tokens, according to online business index Cryptwerk.
- The median holding time for Shiba Inu is only 13 days, per Coin base. This clearly shows SHIB attracts swing traders and not the buy-and-hold investors needed to support an 11,000,000% move higher.
- History clearly shows that five-and-six-digit percentages move higher in the crypto space eventually encountered mammoth corrections.
- Shiba Inu has no competitive advantage. There is nothing specific about its processing times or transaction fees that makes it worth spending over other payment coins.
Long story short, this barrel coin is likely to lose much of its value in the coming weeks, months and years.
Another cryptocurrency with a bit of “pote-tential” it should be avoided like the plague in November i Floki Inu (CRYPTO: FLOKI). That’s right, yet another coin that has risen in value and is inspired by the Japanese Shiba Inu dog breed.
Over the past four months, FLOKI tokens have risen in value by more than 6,500% since November 9th. The core catalyst appears to be Tesla Motors‘ (NASDAQ: TSLA) CEO Elon Musk. Musk is no stranger to influencing the crypto market with his Shiba Inu-themed tweets and memes. However, there is particular precedence for Floki Inu, as the world’s richest person over the summer adopted a Shiba Inu dog, which he called Floki. Whenever Musk writes about his dog or the Shiba Inu breed, FLOKI hodlers take it as their bid to buy.
On a more tangible level, Floki Inu aims to differentiate itself with three projects. According to its White Paper, it aims to create a non-fungible token (NFT) gaming metavers that will become known as Valhalla, a merchandise marketplace known as FlokiPlaces, and an education platform called Floki Inuversity. Floki Inu is also collaborating with Elon Musk’s brother, Kimbal Musk, on the Million Gardens movement, which will address global hunger problems.
If you just read the white paper, you would think the developers have a winner. But the reality is that Floki Inu has no more utility than Shiba Inu or virtually any other dog-themed cryptocurrency. There are well over 500 million entrepreneurs worldwide, and the best the White Paper can bring together is a partnership with CryptoCart that gives proprietors access to around 1,700 stores.
Apart from minimal utility, there does not appear to be any connection between Elon Musk and the FLOKI development team. Although they work with Musk’s brother, Tesla’s CEO himself is drawn to investors.
To start, as pointed out by my colleague Will Ebiefung, Floki has Inu launched a large, aggressive advertising campaign in the UK to increase awareness of the coin. But according to Financial Times, this campaign may arouse the anger of UK regulators.
Long story short, Floki Inu rides on a wave of hype centered on Shiba Inu-themed coins, but it’s yet to bring anything authentic or differentiating to the table.
To make this a Shiba Inu-themed trifecta, the third cryptocurrency is to be avoided like the plague in November (and frankly far beyond) Dogecoin (CRYPTO: DOGE).
Before Floki Inu even made its debut in June, Dogecoin jerked the heartbeat of crypto investors. During a six-month stretch between early November 2020 and early May 2021, Dogecoin galloped higher by just over 27,000%. In some contexts, this represented a larger gain than what the S&P 500 had delivered to investors since the beginning of 1965.
Not to sound like a broken record, though the core catalyst here is again Tesla’s CEO Elon Musk. Musk has referred to himself as the “Dogefather” and he owns DOGE tokens in his crypto portfolio. In fact, Musk has previously tweeted that he is working with Dogecoin’s development team to improve the coin’s transaction efficiency.
It’s there unfortunately a laundry list of reasons to avoid Dogecoin, even with Musk’s ownership and tweet-based enthusiasm for the coin. For example, Dogecoin’s transaction fees are significantly higher than most popular cryptocurrencies. In addition, transactions on its blockchain are settled and validated more slowly than a number of payment coins.
Like SHIB and FLOKI are there too an overwhelming use case. According to Cryptwerk, just over 1,900 companies accept DOGE as a form of payment. It’s much more than SHIB, but DOGE has had a seven-year lead. But compared to the total number of companies that exist, only a microscopic fraction has opened their arms to DOGE.
The main theme here is it none of these projects provide any real differentiation or benefit which will help them stand out in the long run. They are popular because of Elon Musk’s tweets and the hype surrounding the Shiba Inu breed. Unfortunately, none of these factors represent a solid investment dissertation.
This article represents the opinion of the author, who may disagree with the “official” recommendation position for a Motley Fool premium advisory service. We are motley! Questioning an investment dissertation – even one of our own – helps us all think critically about investing and make decisions that help us become wiser, happier and richer.