Cryptocurrency markets are booming this year.
The cryptocurrency industry has plunged into a cold winter in 2022. The cumulative value of every coin and token in the market has fallen to just $828 billion, down from a high of $3 trillion in 2021.
A series of high-profile collapses in the crypto industry, headlined by the failure of FTX exchange rate – eroded investor confidence and led to losses. But the industry has become in a much stronger position, and the total value of all cryptocurrencies in the market has now reached a new record of $3.5 trillion.
The industry’s top coins and most speculative meme tokens delivered gains in 2024. Dogecoin (DOGE -0.39%), Shiba Inu (SHIB 1.28%)And Bitcoin (BTC 0.84%) have seen returns of 362%, 146% and 121% this year so far, respectively. So which one is the best buy for investors?
Image source: Getty Images.
The case of Dogecoin
Dogecoin may be sitting on a 362% gain this year, but it’s still trading below its all-time high of $0.73 from 2021. In fact, it was sitting near a low of 52 weeks just two months ago, but everything changed when former President Trump was re-elected with the help of Tesla CEO Elon Musk.
Musk called Dogecoin his favorite cryptocurrency of 2021. He regularly promoted it on social media using memes, and he even participated in a Dogecoin-related comedy skit on Saturday evening live on May 8, 2021. Unfortunately, the cryptocurrency plunged 92% following this event as investors realized that Musk had no concrete plans to sustain his support.
Simply put, Dogecoin’s 2021 rally was built entirely on speculation, and this time appears to be no different. After Trump’s election victory on November 5, he announced the creation of a new U.S. government entity called the Department of Government Effectiveness, or DOGE for short. Musk himself will lead it, and the acronym DOGE refers to his favorite cryptocurrency.
This appears to be one of the driving forces behind Dogecoin’s recent rise, although there is no suggestion that the token will play a role in the new government department. But even if Musk finds a use case for Dogecoin, it won’t necessarily lead to more upside. In December 2021, it announced that Tesla would accept the token as payment for certain merchandise items, which did little to prevent its decline in value.
Currently, only 2,520 merchants worldwide accept Dogecoin as payment for goods and services (according to Cryptwerk), and many of them are obscure internet companies and online gaming platforms. In other words, the token has very little utility, and this is a major obstacle it must overcome in order to create lasting value for investors.
The case of the Shiba Inu
Shiba Inu rose to fame shortly after Dogecoin and generated one of the best returns in the history of financial markets when it soared 45,278,000% in 2021. In other words, if you didn’t invest than $3 in the meme token on January 1, 2021, your position would have been worth more than a million dollars by December 31!
However, like Dogecoin, Shiba Inu has lost over 90% of its peak value in 2022. Speculative frenzies never last, and this meme token doesn’t have a prominent figure like Elon Musk in its corner to keep investors interested. investors.
Nonetheless, Shiba Inu has gained 146% in 2024 so far on improving sentiment in the crypto industry, but it is not even halfway to regaining its 2021 all-time high. Shiba Inu community has tried to create new use cases. for the token to support its value, but they didn’t move the needle. Developers even began creating a metaverse in 2021, in which investors could spend their Shiba Inu tokens to customize virtual land blocks. However, three years later, the virtual world has still not seen the light of day.
Only 1,032 merchants worldwide accept Shiba Inu as payment for goods and services (according to Cryptwerk), so it has even less real-world utility than Dogecoin. Therefore, don’t be surprised if the last rally ends up failing.
The case of Bitcoin
Bitcoin is the largest cryptocurrency in the world. It has a market capitalization of $1.9 trillion, which alone represents more than half of the crypto industry’s total market capitalization. With a 121% year-to-date gain, Bitcoin may be up less than Dogecoin and Shiba Inu right now, but it’s actually trading at an all-time high.
The industry-leading cryptocurrency doesn’t necessarily have additional utility over Dogecoin or Shiba Inu because it isn’t widely accepted as a payment method in places where consumers do their daily shopping. However, Bitcoin has become a reliable store of value, and many experts compare it to a form of digital gold.
The U.S. Securities and Exchange Commission (SEC) approved dozens of Bitcoin exchange-traded funds (ETFs) this year, giving financial advisors and institutional investors a regulated way to own the cryptocurrency. The top 10 ETFs alone manage almost $100 billion of customer money, and as this figure continues to grow, it portends further rise in the price of Bitcoin.
The value of the world’s underground gold reserves currently stands at $18 trillion. This could be a suitable long-term target for Bitcoin’s market cap if the broader investment community actually embraces it as a digital alternative to the shiny yellow metal. This implies a price per Bitcoin of around $909,000, which represents a potential upside of 826% from where it is trading at the time of this writing.
Some Wall Street analysts believe that figure could rise further in the long term. Cathie Wood’s Ark Investment Management, for example, estimates that the price of a single Bitcoin could reach $1.48 million by 2030, based on eight potential factors. Adoption by institutional investors and becoming digital gold are just two.
The judgment
These three cryptocurrencies are speculative assets. Investors buy them largely in hopes of higher prices in the future.
However, Bitcoin probably has the best chance of generating long-term upside for the reasons I’ve outlined. Despite several sharp corrections over the past decade, it has always recovered to reach new highs. The more often this happens, the more confident investors will be in its effectiveness as a store of value.
Dogecoin and Shiba Inu, on the other hand, have not demonstrated this resilience, and either is unlikely to gain support from regulators or institutional investors in the future. Therefore, be careful if you are considering purchasing one or the other.
