If You'd Invested $1,000 in Shiba Inu 5 Years Ago, Here's How Much You'd Have Today

For a few years now, the stock market has largely been dictated by one catalyst: artificial intelligence (AI). The proliferation of AI has fueled a rally behind technology, energy, and infrastructure stocks in particular.

But with the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) trading at all-time highs, some investors fear that stocks may be getting a little frothy. In these situations, it's not surprising to see capital flow toward alternative investments -- commodities, art, real estate, and more recently, cryptocurrency.

Among the more popular cryptocurrencies is Shiba Inu (CRYPTO: SHIB), which trades for just fractions of a penny. Let's examine how Shiba Inu emerged as one of the biggest forces in the crypto landscape and assess whether now is an ideal time to invest.

What is Shiba Inu coin?

At its core, Shiba Inu is an altcoin to another dog-inspired cryptocurrency, Dogecoin. Both tokens generally experience volatile price swings that are usually tied to comical memes or online narratives created inside of forums such as Reddit's r/wallstreetbets.

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Is Shiba Inu a good cryptocurrency investment?

It's been almost exactly five years since Shiba Inu first launched. At that time, there was a total supply of 1 quadrillion tokens in circulation trading at about $0.000000000056, according to data from CoinMarketCap. Today, Shiba Inu trades for $0.0000095 -- implying a return of about 17,000,000%. This means that if you invested just $1,000 at Shiba Inu's inception, you would now have more than $170 million.

Gains of this magnitude are abnormally high. This raises the question: What fueled Shiba Inu's rally?

While its developer community has built in some value-add features -- such as its decentralized exchange (DEX), ShibaSwap -- Shiba Inu largely remains a niche protocol within the broader crypto realm. The reality is that the token's explosive gains were mostly driven by speculation and tongue-in-cheek "endorsements" from celebrities.

In other words, Shiba Inu simply lacks the same level of real-world utility and institutional adoption as other cryptocurrencies. Therefore, much of its value is based on perception as opposed to concrete fundamentals.

Against that backdrop, it's important for beginner investors to not make the mistake of thinking a low price equates to a good deal. That would be falling for a value trap -- a tough lesson to learn and accept.

What are the best options to gain exposure to crypto?

I view investing in cryptocurrency through the same lens as stocks -- seek out the equivalent of blue chip opportunities.

The most mainstream cryptocurrency right now is Bitcoin, which many on Wall Street refer to as digital gold given its capped supply of 21 million coins.

If you do not want to purchase Bitcoin outright, there are other options including spot Bitcoin exchange-traded funds (ETFs) or investing in Bitcoin proxies such as Coinbase, Robinhood Markets, GameStop or Strategy -- the latter of which have added Bitcoin to their corporate balance sheets. Bear in mind that both GameStop and Strategy are seen as meme stocks, and so pronounced volatility should be expected. I think a more prudent approach is to invest in iShares Bitcoin Trust, an ETF offered by BlackRock.

Outside of Bitcoin, Ethereum remains one of the most interesting plays on broader decentralized finance (DeFi) adoption. Meanwhile, XRP could be a more insulated opportunity as far as speculation goes, given the token already has notable traction in the financial services arena.

Although some of Shiba Inu's earliest investors have recognized enormous gains, it's highly unlikely the token will ever repeat the millions-percentage returns during its earlier surges.

All told, I see Shiba Inu as an amusement park for day traders. Smart investors understand that any momentum the token experiences is almost exclusively tied to hope-filled narratives and lacks sound logic.

Adam Spatacco has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and iShares Bitcoin Trust. The Motley Fool recommends BlackRock and Coinbase Global. The Motley Fool has a disclosure policy.