My Honest Opinion of Shiba Inu

Shiba Inu (CRYPTO: SHIB) has long been one of my favorite crypto meme coins. In 2021, the token's price surged by more than 40,000,000%! A $3,000 investment at the start of 2021 would have been worth more than $1 billion during Shiba Inu's October 2021 peak. A paltry $3 investment would have turned into a cool $1 million.

With these returns in mind, it's not hard to understand why so many investors are attracted to meme coins like Shiba Inu. But it's important to remember that meme coins, almost by definition, have very little real-world utility.

Image source: Getty Images.

"Meme coins are a type of cryptocurrency that usually originate from an internet meme or as a satirical joke," research from Charles Schwab explains. "Meme coins typically have limited or no functionality, and their prices are largely driven by online hype and speculation."

Limited or no real-world functionality essentially creates huge downside risk for investors should the social winds turn against a meme coin.

"Demand for meme coins is often fueled by social media communities, influencers, and viral trends, making prices highly volatile," Schwab's research warns. "Meme coins carry significant downside risk -- prices can collapse as quickly as they spike, and buyers should be prepared to lose their entire investment."

In short, it's hardly fair to call a meme coin like Shiba Inu an "investment." In reality, Shiba Inu is more akin to a lottery ticket. Huge upside is possible, but also a sizable downside. Its token price has fallen by more than 90% on several occasions and it is 93% below its record high.

Given Shiba Inu's past bull runs, however, it's fair to ask whether investors should allocate even a fraction of their portfolio to this speculative token. My answer to this question may surprise you.

Here's what I really think about Shiba Inu as an investor

To understand Shiba Inu, it's helpful to compare it with another popular crypto asset, specifically Bitcoin (CRYPTO: BTC).

Like Shiba Inu, Bitcoin doesn't have an obvious use case. Yes, there is a growing ecosystem of decentralized apps and networks designed around Bitcoin. And Bitcoin is widely used for peer-to-peer transactions worldwide. But like gold, the market assigns a huge value to Bitcoin simply for being itself -- just like Shiba Inu.

From this perspective, Shiba Inu's primary value proposition isn't much different from that of Bitcoin. There's even a small but growing ecosystem being built around Shiba Inu.

I'm a long-term Bitcoin bull. Yet I've regularly warned against buying Shiba Inu as an investment. Why? It all comes down to one factor: reputation.

"Put simply, I like Bitcoin due to its increasingly accepted position as the 'digital' gold," I wrote earlier this month. "Bitcoin's long-term supply is fixed. Bitcoin mining is expected to end sometime around 2140, with supply inflation rates gradually stepping down until then. In a nutshell, Bitcoin is a stateless, fixed supply asset with near-global name recognition. If you buy Bitcoin directly, there is also essentially no cost to ownership, unlike other investment vehicles."

"People use Bitcoin as a speculative asset," former Federal Reserve Chair Jerome Powell observed in 2024. "It's like gold -- it's just virtual and digital."

Put simply, Shiba Inu will never attain Bitcoin's perception as digital gold. Bitcoin, after all, holds the unassailable position as the first crypto asset in history. It has a higher market cap than every other crypto combined. And it's owned by retail investors, large financial institutions, pension funds, endowments, hedge funds, exchange-traded funds, and corporate treasuries. Some sovereign wealth funds have even begun to sell gold in exchange for Bitcoin.

Perhaps surprisingly, I think there is room for Shiba Inu in investors' portfolios, as long as those investors can accept heavy volatility and perhaps a complete loss of capital. Unlike Bitcoin's relationship with gold -- which has a $29 trillion market cap compared to just $1.7 trillion for Bitcoin, leaving plenty of long-term appreciation potential -- Shiba Inu lacks a similar investment thesis. So while I'll maintain my investment in Bitcoin, Shiba Inu won't appear in my portfolio anytime soon.

Charles Schwab is an advertising partner of Motley Fool Money. Ryan Vanzo has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool recommends Charles Schwab and recommends the following options: short September 2026 $95 calls on Charles Schwab. The Motley Fool has a disclosure policy.