\n<\/p>\n
Understanding Shiba Inu After a year that saw Shiba Inu return 63,000,000% and Dogecoin go up 4,600%, can investors still strike it rich in 2022? Here is what you need to know before buying either of these cryptos.<\/p>\n
Image source: Getty Images.<\/p>\n
Shiba Inu is a relatively new altcoin, meaning a crypto other than Bitcoin, developed in August 2020 on the Etherium blockchain. It currently carries a $19.4 billion market cap and is the 10th-most-popular\u00a0crypto on the Coinbase exchange.<\/p>\n
An anonymous group called Ryoshi started Shiba Inu as an experiment in decentralized spontaneous community building. In other words, could Shiba Inu survive with \u201cno centralized team, no funding, and no direct leadership?,\u201d according to the coin\u2019s white paper.<\/p>\n
Shiba Inu\u2019s gains seem to answer that question, and with a price per coin of fractions of a cent, investors can accumulate large amounts for relatively little money.<\/p>\n
Understanding Dogecoin<\/p>\n
Dogecoin, often referred to as the original \u201cmeme coin,\u201d is an altcoin created in 2013 as a literal joke by its founders. They created Dogecoin to poke fun at the wild speculation around cryptocurrencies back then.<\/p>\n
Like Shiba Inu, Dogecoin uses an easily recognizable logo of a Shiba Inu dog, which has helped feed the coin\u2019s popularity on the internet. Although Shiba Inu is built on the Etherium blockchain, Dogecoin runs on its own network, the Dogecoin blockchain.<\/p>\n
However, Dogecoin is no longer a joke; it\u2019s the ninth-most-popular cryptocurrency on Coinbase and carries a $23.4 billion market cap, making it larger than some of the market\u2019s most popular growth stocks. It also has a relatively small per-coin price of about $0.18.<\/p>\n
Value built on going viral<\/p>\n
It\u2019s important to know what drives the value of a cryptocurrency and how altcoins like Shiba Inu and Dogecoin differ from Bitcoin. Whereas the U.S. dollar is issued and regulated by the U.S. government and central bank, cryptos are not. This detachment from the traditional monetary system (hence the term decentralized) appeals to many crypto investors.<\/p>\n
But there are significant differences between Bitcoin and altcoins like Dogecoin and Shiba Inu. Bitcoin\u2019s scarcity and growing acceptance have played a key role in driving its increase in value over the years. There is a maximum supply of 21 million Bitcoins; there can never be any more.<\/p>\n
Bitcoin has also gotten notable traction in gaining acceptance in the broader economy. Some merchants accept Bitcoin as payment, some athletes take their salaries in Bitcoin, and some corporations are even accumulating it to hold on their balance sheets as an asset.<\/p>\n
In contrast, Shiba Inu and Dogecoin have no notable economic use at this point. Meanwhile, both altcoins have a much larger supply in circulation than Bitcoin. Dogecoin now has 132 billion DOGE circulating, while Shiba Inu has 549 trillion SHIB. These huge supplies are increasing, which is partly why their per-coin prices are so low. To date, the only way that these coins have gained value is by going viral on the internet; these temporary surges in demand have caused prices to be very volatile.<\/p>\n
Managing risk is key<\/p>\n
Shiba Inu is a newer coin and probably has more buzz going for it now, as Dogecoin\u2019s peak seems to have come when Tesla Chief Executive Officer Elon Musk was tweeting about it a few months back.<\/p>\n
Investments that fluctuate primarily because of hype are speculative, and investing a lot in them is reckless. What goes up, can just as easily come back down, so assets that have appreciated as much as Shiba Inu and Dogecoin have, can significantly drop without much warning.<\/p>\n
This article represents the opinion of the writer, who may disagree with the \u201cofficial\u201d recommendation position of a Motley Fool premium advisory service. We\u2019re motley! Questioning an investing thesis \u2014 even one of our own \u2014 helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.<\/p>\n
Investors must manage their risk by never investing more than they can afford to lose. With wild swings in speculative cryptocurrencies, it doesn\u2019t take vast sums to make big profits. If you are fortunate enough to strike some significant gains, don\u2019t be afraid to take profits.<\/p>\n