Shiba Inu (CRYPTO: SHIB) and Bitcoin (CRYPTO: BTC) both have pseudonymous founders, but that's about the only thing the two cryptos have in common. One is a giant that could underpin future digital payment systems. The other is struggling to regain its glory days from 2021.
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Shiba Inu vs. Bitcoin
Bitcoin was the first cryptocurrency, and it is in a league of its own. Its market cap of $1.8 trillion puts it ahead of Meta Platforms (NASDAQ: META) and Tesla (NASDAQ: TSLA) and accounts for over 50% of the entire crypto industry.
In contrast, Shiba Inu's $5.1 billion market cap does not even put it in the top 25 biggest cryptos. As meme coins go, Shiba Inu does have some utility, including its ShibaSwap decentralized exchange. But ShibaSwap's trading volume is low, and it isn't generating much cash. Over the past year, the monthly average exchange fees came to around $430, per DeFiLlama.
Long-term potential
Shiba Inu faces a couple of major long-term challenges. Firstly, there are almost 590 trillion tokens in circulation, which keeps the price at a tiny fraction of a cent and hinders adoption. If you wanted to buy an $8 gingerbread latte with Shiba Inu, it would cost over 900,000 SHIB.
Secondly, Shiba Inu is overly reliant on burning -- essentially taking tokens out of circulation. This can increase the price of the remaining tokens. But without demand and utility, it becomes problematic. Token burning can't be the only way to drive prices upward.
Bitcoin also faces challenges. The growth in the stablecoin market may erode demand. Quantum computing may undermine Bitcoin's security. However, Bitcoin could still play a crucial role in the online financial system. Institutional investment has soared in recent years, and many view Bitcoin as a form of digital gold.
Cryptocurrencies are high-risk investments, and all of them have the potential to go to zero, even Bitcoin. However, Bitcoin's dominance, actual use cases, and high levels of adoption mean it is considerably more likely to survive and thrive than Shiba Inu.
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Emma Newbery has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Meta Platforms, and Tesla. The Motley Fool has a disclosure policy.