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Do This Before Shiba Inu Tanks

Shiba Inu (CRYPTO: SHIB) has skyrocketed in popularity over the past few months and has probably minted a few millionaires, and possibly even billionaires. That's because the cryptocurrency, inspired by a Japanese dog breed, has gained 53,216,940% over the past 15 months. If you invested $100 in August 2020, you'd be sitting on more than $5 million today.

But this isn't a plug to buy in today. In fact, Shiba Inu isn't likely to post those kinds of gains again, because the coin's rapid ascent is less about its intrinsic worth and more about investor hype. And as newer types of cryptocurrencies that do have more real value drop on the markets, Shiba Inu's valuation has started to deflate, losing 20% over the past week.

That's a drop in the bucket for anyone who already benefited from the cryptocurrency's gains, but it might signal the beginning of a decline, or at least volatility that makes it a riskier bet than it's already been. And it should signal to investors that it might be time to look for other cryptocurrencies to invest in.

Before Shiba Inu tanks, investors should invest their funds in more promising cryptocurrencies. I'd suggest Ethereum (CRYPTO: ETH) and Solana (CRYPTO: SOL).

Image source: Getty Images.

A response to the cryptocurrency naysayers

OK, I'll admit it: I'm not big into cryptocurrency. I don't recommend speculative investing, and cryptocurrency in general looks like one big speculation to me. I'd never advocate investing in Shiba Inu, which has skyrocketed seemingly on nothing other than hype.

But as coins such as Bitcoin and Ethereum become more accepted in the world at large, with trustworthy companies such as PayPal and Square leaning into them, and they gain acceptance as a form of payment by merchants, it's hard to ignore the fact that they do have utility.

That's where Ethereum comes in. Ethereum is decentralized finance (DeFi) technology that is built on the blockchain. If you don't know too much about cryptocurrency, that probably wasn't a helpful definition. So to explain further, decentralized finance refers to financial transactions that take place without a central authority, or an intermediary, like a bank. Blockchain refers to a digital ledger, or database of transactions, where developers can encode information in blocks of data that are linked together, forming a chain.

There are several reasons Ether (the cryptocurrency based on the Ethereum platform) is looking like more than a speculative investment. One is that more companies, such as Starbucks, are accepting it as a form of payment. Another is that it has use in executing digital transactions, such as buying digital art. Finally, it's being traded on more exchanges and through mainstream trading apps, such as PayPal.

Ethereum has a $493 billion market cap and is the second most-traded cryptocurrency on the cryptocurrency exchange Coinbase Global. It's up 584% over the past year, which is a more sustainable gain than Shiba Inu's. If you're interested in investing in cryptocurrency, Ethereum is probably a great place to start.

A newer option with long-term potential

Solana is similar to Ethereum, built on the same foundation of DeFi and blockchain. But it's newer (therefore giving investors a head start) as well as faster and cheaper. It allows developers to create dApps, or decentralized apps, that interact with the blockchain, or instructions that support its projects.

Its creators developed it to be more scalable that what already exists, which means it could have far-reaching applications in finance and other digitally based applications. They say, "Developers can think of Solana as a global computer where anyone in the world can deploy programs to it, and communicate with the ones that already exist."

It can handle 65,000 transactions per second, which the developers say is 4,000 times faster than Ethereum, and transaction fees are $10 per million transactions. It's also compatible with Ethereum, so users can move tokenized assets between the two. In other words, it's a next-level solution for cryptocurrency users, which could be attractive to investors.

Solana, or the Sol token used to trade it, has a $65 billion market cap, and it's the fourth most-traded cryptocurrency on Coinbase. It's up more than 9,000% over the past year, but it has a long future ahead as it improves upon previous DeFi platforms.

Then again, investors might want to invest in safer investments than cryptocurrency altogether, or gain exposure to cryptocurrency through well-established companies.

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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bitcoin, Ethereum, PayPal Holdings, Square, and Starbucks. The Motley Fool recommends the following options: long January 2022 $75 calls on PayPal Holdings and short October 2021 $120 calls on Starbucks. The Motley Fool has a disclosure policy.


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