Two meme cryptocurrencies, both inspired by shiba inu dogs, are now within the top 10 by market value.
As of Monday afternoon, dogecoin, which launched in 2013 as a joke, ranks No. 10 with a market value of over $35 billion, according to CoinGecko. It’s currently trading at around 27 cents. A token called shiba inu, which launched in 2020 to poke fun at dogecoin, ranks No. 9 with a market value of over $38 billion. Shiba inu hit an all-time high of $0.00008616 on Thursday.
Since Wednesday, both dogecoin and shiba inu have frequently swapped places in the rankings, competing in somewhat of a rivalry. In fact, the shiba inu community refers to the token as the “dogecoin killer.”
But although their supporters may not want to admit it, dogecoin and shiba inu have a key characteristic in common, Caitlin Cook, head of community at crypto asset management tech company Onramp Invest, tells CNBC Make It.
Both are largely driven by the communities behind them, Cook says. “The dogecoin community and the shiba inu community are both very, very vocal and committed,” she explains.
The strength of community
“Altcoins like [shiba inu] are primarily community-based, meaning their success is largely dependent on the success and growth of its community, instead of its utility,” Douglas Boneparth, certified financial planner and president of Bone Fide Wealth, previously told CNBC Make It. (The term “altcoins” refers to the multitude of cryptocurrencies aside from bitcoin.)
The shiba inu token creator even calls it an “experiment in decentralized spontaneous community building” in its white paper.
Both shiba inu and dogecoin’s growth can be largely attributed to supporters hyping up them up, Cook says. “It’s the power of the people who are amplifying it that kind of drives the performance a lot of the time,” she says.
That includes celebrity supporters like billionaire Elon Musk, CEO of SpaceX and Tesla. Musk often tweets about different cryptocurrencies, and in doing so, has seemingly impacted their prices.
A few times throughout 2021, shiba inu appeared to jump after Musk repeatedly posted images of his shiba inu puppy on Twitter. But on Oct. 24, Musk clarified that he doesn’t own any shiba inu tokens and that he only owns bitcoin, ether and dogecoin.
But overall, the current surge is “so much community-driven, and any token or coin out there has the opportunity to run up like this if someone with a big microphone is amplifying it,” Cook says.
The risk factor
However, the fact that these tokens are so susceptible to price swings based on who’s talking about them is a big part of what makes investing in them risky.
Both dogecoin and shiba inu are “speculative bets,” Cook says. “They’re not long-term investments for most people, and most people probably wouldn’t have a long-term thesis behind why they would hold them for a long period either.”
That’s because they’re considered to be bets on a community rather than a technology, she says. “There’s not a viable product.”
Experts warn that any cryptocurrency investment can result in the loss of your entire investment. They generally recommend that you only invest what you can afford to lose, regardless of which cryptocurrency you choose. And altcoins may require additional caution due to their differences from something like bitcoin, including their structure, supply and utility.
Bitcoin launched in 2009 with the intent to be a peer-to-peer financial system. Its blockchain was carefully created with a well-thought-out ecosystem. Bitcoin also has a limited supply, which allows for built-in scarcity by design. Because of that, it’s seen as a store of value by its holders, who also hope it becomes a prominent decentralized digital currency.
Most altcoins lack these characteristics. Though their communities are a strength, it’s something they’re very dependent on, since many lack technological development and don’t have a supply cap.
Due to volatility and risk, “I always say that crypto isn’t a suitable investment for a lot of people,” Cook says. “When you get into more volatile altcoins, it’s an even less viable investment for a lot of people that don’t have the stomach for it.”
Of course, it’s impossible to know how things will unfold for dogecoin and shiba inu. “Who knows? Maybe one day grandma will give her grandkids some SHIB for their birthday,” Boneparth says. “The future of either depends on wide-scale adoption and use in our current financial system.”