Should You Forget Bitcoin And Buy Shiba Inu Instead?

In 2021, many cryptocurrencies hit all-time highs as stimulus checks, social media buzz and “fear of missing out” (FOMO) brought a bull run. But in 2022, this rally fizzled out in a “crypto winter” as rising interest rates drove investors away from cryptocurrencies and other speculative investments.

Bitcoinhis (BTC 1.80%) the price dropped from nearly $69,000 in November 2021 to less than $16,000 in November 2022. Shiba Inu (SHIB 7.29%)which set a record high of $0.000086 in October 2021, fell over 90% to $0.000008 by June 2022.

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However, the crypto market heated up again in 2023 and 2024 as interest rates stabilized. Bitcoin is now trading at over $63,000, while Shiba Inu has doubled from its multi-year low to around $0.000018 per token. Both tokens could go even higher now that the Federal Reserve has finally started to cut interest rates.

For many investors, Bitcoin might seem like the best “blue chip” play in the market recovery. With a market capitalization of $1.26 trillion, it is the world’s most important cryptocurrency and the world’s 10th most valuable asset. However, bolder investors may wonder if they should buy Shiba Inu, which only has a market cap of $11 billion, instead of Bitcoin to generate even bigger gains. Let’s look at Shiba Inu’s strengths and weaknesses to see if it is a viable alternative to Bitcoin.

Differences between Shiba Inu and Bitcoin

Bitcoin is still mined with the proof of work (PoW) validation mechanism, which requires the use of miners powered by ASIC (application specific integrated circuit) chips. The big mining companies like Marathon Digital (GREAT 1.71%) we need to purchase thousands of these energy consuming machines to mine a steady supply of Bitcoins.

Only 21 million bitcoins can ever be mined. About 19.8 million of these Bitcoins have already been mined, and the final token is expected to be mined by 2140. This difficulty increases every four years with each “halving”, which cuts the rewards for mining Bitcoin in half. The whole process makes it similar to a digital version of the precious metal, so it is the only cryptocurrency that can be officially classified as a commodity instead of a security by the US Securities and Exchange Commission (SEC). It’s also why the SEC approved the first spot price exchange-traded funds (ETFs) earlier this year.

Shiba Inu is a symbol that was originally drawn on Ethereum (ETH 1.45%) blockchain, which transitioned from the PoW mechanism to the more energy-efficient proof-of-stake (PoS) mechanism in 2022. The PoS mechanism only requires data validation on its blockchain without any mining hardware, but this key difference prevents the SEC from classifying PoS Tokens as commodities. Instead, they are classified as securities, which are subject to more regulation than commodities.

Besides energy efficiency, PoS tokens have two key advantages over PoW tokens. First, PoS blockchains support smart contracts, which can be used to develop decentralized applications (dApps), non-fungible tokens (NFTs), and other crypto assets. The expansion of that ecosystem supports the prices of their underlying tokens. Second, PoS tokens can be staked (locked for certain periods) on the blockchain to earn interest-like rewards. This rigidity locks more investors into its ecosystem.

So unlike Bitcoin, Shiba Inu cannot be mined. Instead, it preempted its entire supply of nearly a quadrillion tokens ahead of its 2020 launch and has already burned (out of circulation) more than 40% of those tokens to shore up its supply. It has also expanded its own ecosystem by launching its Layer-2 blockchain protocol Shibarium, which supports faster transactions, and its cross-decentralized exchange (DEX) ShibaDEX.

The main problems with the Shiba Inu

Shiba Inu might seem like an interesting alternative to Bitcoin, but it is just one of the many PoS tokens that have been mined on the Ethereum blockchain. Ethereum also has its own native “blue chip” token, Ether, which trades at around $2,600 with a much larger market cap of $317 billion. Also, Shiba Inu and other Ethereum-based tokens cannot process transactions as quickly as newer PoS blockchains such as Solana (SOL 2.75%) and Cardano (ADA 3.60%).

Shiba Inu is also not valuable enough to be considered for approval of its own spot price ETFs like Bitcoin and Ether. It is accepted by a few companies as a payment option, but it has not yet been adopted as much as Bitcoin or Ether.

In other words, Shiba Inu’s limited utility and lack of clear advantages over Bitcoin, Ether, and other larger cryptocurrencies or faster blockchains could limit its growth potential for the foreseeable future. It will remain a niche altcoin for short-term traders who dream of quick multibagger wins instead of a compelling alternative to Bitcoin.

If you are bullish on the crypto market, you should simply stick with Bitcoin. Its new spot-priced ETFs, scheduled discounts and growing adoption among institutional investors should drive its growth over the next few years. But you should probably forget about the Shiba Inu, which could generate some short-term gains but still lacks clear long-term catalysts.