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Why Shiba Inu's Spectacular Gains in October Make Almost No Sense – Investorplace.com


Shiba Inu (CCC:SHIB-USD) has had a spectacular run so far in October. It is priced at $0.002523 cents per SHIB token as of Oct. 17, up 248% from $0.000725 cents as of Sept. 30. What that means is that 1 million SHIB crypto tokens would have cost $7.25 at the end of September. But now those 1 million tokens are worth $25.23.

The back of a Shiba Inu puppy in a camping tent

Source: Shutterstock

This gives SHIB a market capitalization of just over $11.27 billion, as of Oct. 18, according to Coinmarketcap. It also ranks it as the 19th largest crypto, even ahead of Polygon (CCC:MATIC-USD), Stellar (CCC:XLM-USD) and VeChain (CCC:VET-USD).

As I pointed out in my last article, one reason this may have happened is that the SHIB crypto was recently listed in Coinbase Global (NASDAQ:COIN) for trading. This makes it much easier for many investors to pick up the tokens.

SHIB and the Low-Cost Fallacy

A lot of research has gone into the “sunk cost fallacy” in investing. Similar to this is the low-cost fallacy. People tend to believe that asset prices with low absolute prices can actually rise faster than those with higher absolute prices.

But this fallacy could be a major reason driving the public to SHIB crypto, given its extremely low absolute prices.

For example, people who buy 1 million tokens today for $25.23 might want to believe that SHIB crypto could rise to $1. That way their $25.23 investment might someday be worth $1 million.

Or they might put $252.30 into 10 million SHIB tokens. Their hope might be that someday, at $1, the tokens would be worth $10 million. But, if they simply looked at the market cap numbers they will quickly come to the realization this is highly unlikely.

For example, for their $25.23 investment to become $1 million, implies that SHIB crypto will be 39,635.35 times their investment cost. But here is why that is almost impossible.

If we multiply SHIB’s present $10 billion market cap by 39,635.35, we get a target market cap of $396.353 trillion (i.e., $396,353 billion). This is simply too high by any imagination.

For example, Bitcoin (CCC:BTC-USD) itself is only $1.25 trillion, and the second-largest crypto, Ethereum (CCC:ETH-USD) has a $449 billion market cap. In fact, the largest market cap stock in the world, Apple (NASDAQ:AAPL), has a market cap of just $2.394 trillion.

Parity With Dogecoin

Let’s set our sights on a lower goal. Given that Shiba Inu is at best a copycat of Dogecoin (CCC:DOGE-USD), what would that make SHIB crypto look like?

Right now Dogecoin has a market cap of $31.5 billion and it is the 9th largest crypto in the Coinmarketcap database list. This is a more attainable goal for investors in SHIB crypto. It implies that the crypto would have to be 2.794 times its present price (i.e., $31.5 billion / $11.27 billion for SHIB crypto).

That would raise the price of SHIB-INU to $70.49 per 1 million SHIB tokens or $0.007049 cents per token. Theoretically, that seems doable, especially given how extremely volatile SHIB crypto prices have been as of late.

What This Means for SHIB Crypto Investors

As I have pointed out many times before SHIB crypto tokens are only for the most speculative of investors. For example, even the likelihood that SHIB crypto could end up having the same market cap as Dogecoin, of which it seems to be a copycat, seems remote.

This is because of the increasing number of uses that Dogecoin is starting to have as a mode of currency exchange. It is also because Elon Musk and a number of large investors now seem to be behind the development of Dogecoin. No major investor has put his hat behind SHIB crypto, at least not yet.

However, as impossible as it might seem, the ability of SHIB crypto to reach parity with Dogecoin, can’t be ruled out. Given what has happened in the past with this highly speculative crypto, rising over 3 times from its present price is possible, but unlikely.

On the date of publication, Mark R. Hake held a long position in Ethereum but did not own any other security mentioned in the article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.



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