Down 50% This Year, Is Shiba Inu an Underrated Buy Right Now?

When meme stocks were taking off back in 2021, Shiba Inu (CRYPTO: SHIB) hit record levels. The highly speculative stocks are hot again this year, but the meme coin hasn't been rallying along with them. While Bitcoin has been rising to new heights, there just hasn't been the same level of excitement around Shiba Inu these days.

Since the start of the year, it has lost close to half of its value, with its market cap now at about $6 billion; there are 20 other coins that are more valuable than Shiba Inu. But could it make for a good contrarian buy, given its reduced valuation? Here's a look at what may be dragging the meme coin down this year, and whether it can recover.

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Shiba Inu hasn't been benefiting from the growing excitement around crypto

What may be most perplexing about Shiba Inu's struggles this year is that the conditions should be ideal for it to do well. The Trump administration has taken a favorable approach to cryptocurrency and is even looking to setting up a Digital Asset Stockpile. While Shiba may not be included as part of that, it's a positive development nonetheless for cryptocurrencies in general.

Meme stocks have been taking off this year, which is a clear sign that there's a significant appetite for risk in the markets. Interest rates have been coming down as well, which can fuel even greater speculation. However, despite these positive factors and what might normally be catalysts for the coin, Shiba Inu hasn't recovered from its sharp decline earlier in the year. That's a problem, as it suggests that it may not be a popular option for investors anymore.

Are crypto investors looking elsewhere?

As the crypto world has evolved and grown in size, investors now have a growing number of options to invest in. Not only can you hold Bitcoin in your portfolio and meme coins but also stablecoins, which may be more attractive options for risk-averse investors who don't want to worry about wildly fluctuating values. Plus, there have been some recent crypto initial public offerings (IPOs), including the highly touted crypto exchange Gemini Space Station.

That is a potential problem for Shiba Inu because that can result in speculative investors spreading their money more broadly. And if there isn't more money coming into the market, that will mean less money to go to highly risky coins such as Shiba Inu.

Meme coins may simply not be as attractive anymore for crypto investors. There are safer ways to invest in crypto and more popular coins to invest in than Shiba, ones which have more practical, real-world applications.

Investors shouldn't count on a big recovery for Shiba Inu

Shiba Inu has fallen to the 21st most valuable cryptocurrency in the world, per CoinMarketCap. It was once common to see it among the top 10 and now it's nowhere near that. As new coins have emerged and new investment opportunities have opened for crypto investors, Shiba Inu has struggled to stay relevant -- and that trend could continue.

Unfortunately, without any clear catalyst on the horizon that can change its current trajectory, I don't see any reason to expect that Shiba Inu will suddenly start to rise in value. It was a risky coin to own before this year, and now, it may be an even riskier option to put in your portfolio. The safest approach is to simply steer clear of Shiba Inu. Although it may be cheaper in value, it's still full of risk and uncertainty. And there's no guarantee that it's going anywhere but down.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.