Cryptos: The Sentiments Driving Shina Inu and Meme Coins
By Chibuike Osigwe
In the world of cryptocurrencies where joke coins can rally more than 500 percent and accumulate high trade volumes on mere tweets by Elon Musk, things can sometimes be confusing.
It doesn’t often make sense to crypto investors that these coins, termed meme coins characterized by an intangible theme that is often a joke rather than a serious project, would pull such strings. Notable among these are dogecoin and shiba inu, currently the leading meme coins by market capitalization, according to data from CoinMarketCap.
Shiba inu followed the same path as major top coins, such as bitcoin and ethereum, that had a good month in October by reaching their all time highs. Despite being below 1 cent, the dog-inspired meme coin got a lot of attention as it hit an all time high of $0.00008854 and returned over 500 percent in October, displacing dogecoin as the meme leader for over two weeks.
A lot of market-moving sentiments were aroused by Elon Musk, a well known doge soldier, who tweeted proudly of not having shiba inu but rather bitcoin, ethereum and dogecoin.
Shiba inu has dropped over 50 percent from its October all-time high. Since then it has also seen heightened volatility, wiping out over $7.3 billion from its market capitalization between November 4 and November 10. Data from the ethereum explorer Etherscan indicates that the plunge was triggered by a whale that moved 10 trillion SHIB to four different wallets in four different transactions. At that time, a single SHIB transaction was valued at about $586 million.
What is Shiba Inu?
Shiba inu (SHIB), dubbed the “dogecoin killer” by its supporters, was created in August 2020 by a pseudonymous founder called Ryoshi, whose primary goal was to move away from “rigid social structures and traditional mindsets, and to become an experiment in decentralized spontaneous community building, so as to give power back to the average person,” according to its 28-page white paper or “woof paper,” as its community calls it.
Just like its dog-inspired older counterpart dogecoin, shiba inu is inspired by the Shiba Inu dogs. The meme coin is an ERC-20 token, which means that it was created and runs on the ethereum blockchain network. It is also the native token of ShibaSwap, a decentralized exchange (DEX).
Shiba inu has a total supply of one quadrillion. Half of it was reportedly sent to ethereum co-founder Vitalik Buterin while the rest is locked up in a liquidity pool on the decentralized exchange, UniSwap. Ryosi also claims that they (founders) do not hold any shiba inu coins. Vitalik Buterin didn’t keep the tokens sent to him as previously thought by . His said to have burned a majority, taking them out of circulation. The rest, he donated to India Covid Relief Fund and other charity organizations. According to CoinMarketCap, shiba inu currently has a total supply of over 589 trillion of which 549,095 billion is currently in circulation.
Shiba’s Recent Surge
Good developments with positive sentiments from investors usually drive up the price of cryptos, but that is not usually the case for meme coins. Their prices can rally with the mere attribution of significant developments.
Generally, the coin’s popularity has surged in recent weeks mainly driven by factors like the listing on coinbase, the second largest crypto exchange by trading volume, which resulted in an inflow of over $870 million within 24 hours. The surge also heightened after over 500 thousand SHIB faithfuls signed an online petition on change.org calling for shiba inu to be listed on Robinhood, a leading online broker in the U.S.
Consequently, the creators recently released a series of non-fungible tokens (NFTs) called “shiboshis” that also run on the ethereum network. The majority of these NTFs feature the shiba inu dogs wearing a party hat or with laser eyes.
Apart from these, it’s just the SHIB army driving the coin and trying to pump the price as data has shown that shiba inu’s trading volume is twice that of the overall 300 meme coins tracked by CoinMarketCap. The same price pumping applies with their rivals, the doge soldiers and other meme coins. Such a rally can be found in a lot of assets, such as how a popular group of retail investors on the Reddit social media platform called the WallStreetBet, drove up the price of some stocks early this year.
The Bias of Retail Investors
With the high price of Bitcoin and major altcoins, new and small retail investors are moving toward cheaper alternatives, especially those with high volatility and high trading volumes such as shiba inu and dogecoin. Late last month, Binance Subsidiary WazirX, India’s largest cryptocurrency exchange and some other exchanges around the world, suffered outages as traders jumped into shiba inu, thereby overloading the servers which delayed lots of trade executions.
This shocked a lot of people including WazirX’s co-founder, Siddharth Menon, who noted in an interview with CoinDesk that: “We were all ready with the bitcoin move, but we were never ready for shiba inu.”
Menon described that some amount of bias might be in play by novice and small retail traders as they are prone to buy tokens like shiba inu due to its relatively cheap price. The suspicion seems not to be far from the truth as the price of 1 SHIB is far below 1 cent. For example, $60 can buy just 0.0007 worth of Bitcoin but can be able to buy 1 million worth of SHIB.
Meme coins seem to have other purposes as well. New and retail traders seem to try out their knowledge in buying, holding and selling a small amount of crypto on various platforms by placing different types of orders and seeing how they are fulfilled. They do this using cheap coins with high-trading volume like shiba inu and dogecoin. Although it might take time for newbies and no-coiners to grasp, they in turn will have an experience with the price swings and volatility of crypto. It is like learning from the best and this prepares them for safer though expensive major coins like bitcoin and ethereum. Overtime, they might change when they realize the biased sentiment and that the meme coins might not reach a certain price due to supply.
The Risks and Rewards
Meme coins like shiba inu are primarily not built on any sophisticated use case or project but more dependent on the success and growth of its community rather than its utility. Hence, they are more vulnerable to rug pulls, otherwise known as “pump and dump.” Their nature makes it very volatile as well.
On the other hand, the abundant supply of meme coins makes it a lot cheaper. Analysts have said that this might limit the price of meme coins from reaching a certain level. For instance, if shiba inu were to trade near bitcoin around $62,000, its total market cap would be $36.5 quintillion, in other words, out of this world.
According to data tracked by Intheblock, 72% of SHIB token owners are in profit as 72% of SHIB wallet addresses are making money from shiba inu at a price of 0.000051. Only 17% of SHIB token owners aren’t making money from their initial investment. These might be recent traders who bought at a higher price. The data also shows that 78% of SHIB tokens are held by large investors or whales, which explains why they have major influence in the price movement.
Shiba Inu’s price has returned over 3,321,058% since its launch and over 700,000% since the beginning of the year. According to reports, a warehouse worker who goes by the name ‘Rob’ invested over $8,000 in shiba inu after reading its whitepaper. He made a return of over $1 million from the October surge, enabling him to retire from the warehouse manager position as a millionaire at the age of 35.
Previously, an early SHIB investor whose transactions influenced the recent shiba inu’s plunge, reportedly gained over $5 billion from a $8,000 investment made during the early days of the meme coin. This and other impressive gains is one of the major reasons investors flock into meme coins even without an understanding of the projects, thereby expanding the meme coin community and increasing their popularity.
Right now, the meme coin ecosystem has shown that being just a community is a use case and a project on its own, especially with those that are driven and inspired by dogs. In this ecosystem, a coin with a lower per unit price of less than a cent can make novice investors and traders feel a little richer and of course mesmerized.
Chibuike Osigwe is an Abuja-based data analyst.