The crypto community came to life in 2009 with the launch of the first cryptocurrency Bitcoin (BTC). New competitor cryptocurrencies started to enter the crypto space in 2011, adopting Bitcoin's blockchain technology to launch their platforms and currencies. Today's crypto market contains thousands of different types of cryptocurrencies, each with some new feature or function that expands upon the principles established by BTC. Digital currencies aren't issued, regulated, or backed by a central authority. They're created via a distributed ledger and peer-to-peer review. All coins are encrypted with a unique computer code called cryptography. Crypto assets are typically stored in digital wallets that allow holders to manage and trade their coins. In 2021, it was estimated that there are nearly 10,000 different types of cryptocurrency that can be traded, with a total market capitalization of approximately $2 trillion.
An Intro to the World of Crypto
New crypto investors should understand that different types of digital currencies fall into two categories. They are either categorized as coins, including Bitcoin and altcoins or categorized as tokens or programmable assets stored within the distributed ledger of a platform. Coins and tokens are forms of digital assets that offer different functions. Coins are built on their own blockchain and intended as a form of currency. Any distributed ledger-based currency that's not bitcoin is called an altcoin. Tokens are also built on blockchain, but instead of currency, they're programmable assets that allow the creation and execution of smart contracts. Smart contracts establish asset ownership outside of the distributed ledger network. Since tokens represent units of value, which include real-world items such as electricity, money, coins, and digital assets, they can be sent and received.
Altcoin is short for an alternative to Bitcoin. Most altcoins, such as Namecoin, Litcoin, Peercoin, and Ethereum, were launched as improvements to Bitcoin. The total supply of many currencies is limited to help create demand and reinforce their perceived value. Each type of altcoin offers crypto investors different functions and features. Some altcoins produce and validate blocks of transactions using a different process, while others offer features such as smart contracts or lower price volatility.
Tokens are created and distributed through an Initial Coin Offering (ICO) similar to a stock offering. They're represented as value (such as bitcoins), security (similar to stocks), or utility tokens with specific uses. This doesn't necessarily mean that tokens are valuable just because they represent value. They're constructed within the distributed ledger of an existing coin such as BTC or ETH.
At the time of writing, there are more than 10,000 different digital currencies in circulation. How? Because distributed ledger technology is open source, any software developer in the world can create something new using the source code. The main driver in this surge of digital currencies is the ease with which new coins can be created. Developers can use the source code of one digital currency to build another. Forks occasionally appear in the software code that change the governing rules of crypto, which can result in the creation of new currencies.
As with any type of investment, taxes and cryptocurrency go hand-in-hand. The IRS and state tax authorities require all U.S. taxpayers to report cryptocurrency sales, conversions, payments, and income. Each type of transaction has different tax implications. Crypto is considered a digital asset and is treated by the IRS like stocks, bonds, and other capital assets. The money gained is either taxed as capital gains or as income depending on how it was acquired and how long it is held for. How you use your crypto assets determines whether or not you owe taxes. Taxable events are transactions that are taxed, and non-taxable events are transactions that aren't taxed.
There are several types of non-taxable events. Purchasing digital assets with fiat currency and holding it, donating digital currency to a qualified tax-exempt charity or non-profit, receiving it as a gift, and transferring coins to yourself are all non-taxable events. Selling crypto assets for fiat currency, converting one coin to another, and spending coins on goods and services are all taxable events as capital gains. Getting paid in coins, accepting it as payment for goods or services, mining, earning staking rewards, earning a return on digital asset holdings, getting crypto assets from a hard fork, receiving an airdrop from a crypto company, and receiving coins as an incentive or reward are all taxable events as income.
Crypto investors who hold onto their assets don't see an immediate gain or loss, therefore the assets aren't taxed. Investors only incur taxes when the asset is sold and they receive either fiat currency or units of another digital currency. This is then considered a realized gain that's a taxable event.
There are a surprising number of goods and services that can be purchased with digital currency. Bitcoin was originally designed to be a peer-to-peer form of electronic cash for online payments. Most digital currency payments are still being developed. In recent years, innovative technologies have made it simpler for vendors to accept digital cash as payments. Vendors are increasingly accepting it as a payment method, and subsequently, more crypto ATM networks are entering the market. What exactly can you purchase with digital currency?
Investors can purchase luxury real estate properties around the world with several types of digital currencies, including BTC, ETH, Cardano, Ripple, and DogeCoin. Online retailers such as Overstock accept coins as payment for furniture. Carmaker Tesla allows customers to purchase a car with bitcoins, and BMW also accepts this form of payment. Some fast-food restaurants allow patrons to pay for their orders with bitcoins. Some travel websites like CheapAir and Expedia Hotels accept several different coins for the purchase of flights, hotels, and tours. If you can afford the experience, you can even pay for your flight into space with Virgin Galactic. Even the art world accepts digital currency as payment. Christie's made headlines when it announced that buyers can use ETH at their auctions.
There are some higher education institutions, such as New York City's King's College, that accept bitcoin for tuition payments. Some students, for example, invest in Bitcoin and cash out to fiat currency once it's time to make school payments. There's also the option of investing in digital currency after graduating and paying off student loans with the investment earnings. This is a high-risk approach given how volatile the price of digital assets and the rising cost of college are.
What Is Shiba Inu?
The Shiba Inu cryptocurrency was created by anonymous founder, Ryoshi, in August 2020. The project is built on the Ethereum blockchain and the token is an ERC-20 altcoin. A community called the Shib Army, whose members share a love of Shiba Inu dogs runs the project. There was initially one quadrillion SHIB tokens minted when the project was launched, however, half of the total supply was burned by being sent to the Ethereum founder Vitalik Buterin's wallet. The number of SHIB holders has increased by over half a million since the project launched. According to CoinMarketCap, SHIB has a circulating supply of 549 trillion SHIB tokens, a market cap of $15.2 billion, and ranks as one of the top cryptocurrencies by market capitalization.
The Shiba Inu cryptocurrency operates on a decentralized computer network that runs blockchain, specifically the Ethereum blockchain. The currency trades for a fraction of a cent, yet despite the minute price, all Shiba Inu coins were valued at over $26 billion in November 2021. Another driver for the price increase was the addition of SHIB to the Coinbase platform.
Shiba Inu crypto is what's known as a meme coin. It's a type of coin inspired by memes and internet jokes and isn't meant to be taken seriously. Such coins often gain popularity as crypto community members start buying into the latest coin to be in on the joke. Once a coin becomes popular and surges in value, retail investors often enter the picture and further drive the price up. The more prominent figures and celebrities embrace this type of coin, the more its popularity increases.
Meme coins have an exceptionally high or unlimited total supply, meaning there are billions of units in circulation. There's no burn mechanism that permanently burns them from circulation, so the number of units keeps increasing. The coin price is highly volatile because it's dependent on community sentiment and outside popular influences. This means a certain popular coin can skyrocket or plummet if the community loses interest.
Investors can enjoy a return by investing in memes, but it's not guaranteed. Meme currencies have higher volatility than mainstream digital currencies and can easily plummet overnight. Keep in mind, though, that these coins are incredibly inexpensive and investors can buy a fair amount with minimal investment. In the best-case scenario, investors see a return of several dollars, and in the worst-case scenario, they lose several dollars. The key to making a good investment decision is to perform your own research before purchasing. Beware of any coin that has no background, difficult to find information, lacks a whitepaper, and lacks an established ecosystem.
How Is Shiba Inu Used?
Shiba Inu is split into multiple tokens to support the entire ecosystem's functionality. SHIB is the foundational currency that's traded and used as a medium of exchange. LEASH is the most limited of the Shiba Inu coins, with a total supply of 107,646 units. Those who validate transactions in the cryptocurrency earn staking rewards. The third, BONE, has a total supply of 250 million units that allow Shiba users to vote on proposals.
The Shiba Inu community also includes ShibaSwap, its own decentralized platform for trading coins, and Shiboshis, a type of non-fungible token (NFT). Shiba Inu was designed as a digital currency, and now has a decentralized crypto exchange that's growing the Shiba Inu ecosystem. There are several use cases for holders of Shiba. It can be used as a digital currency in peer-to-peer transactions or a form of legal tender with businesses that accept it. As of 2022, some 600 businesses accept Shiba Inu as legal tender, in comparison to the more than 7,500 businesses that accept BTC.
The Shiba Inu team launched a decentralized exchange (DEX) in July 2021 called ShibaSwap. DEX's are crypto exchanges that lack a central governing body and are part of decentralized finance (DeFi). This refers to traditional financial services that don't need banks or other financial institutions. DEX's allow traders to swap currencies directly from their distributed ledger wallets without the need to open an account or give personal information. ShibaSwap was built on the Ethereum blockchain and offers trades between tokens built on the same digital ledger.
DEX users can stake their assets into liquidity pools so that the exchange can use them in return for earning coin rewards. ShibaSwap's governance token, Bone allows holders to stake and vote on exchange changes. The Doge Killer is used as a store of value for ShibaSwap. These two are designed specifically to work with the DEX. Shiba's DEX also provides a marketplace for non-fungible tokens (NFTs) called Shiboshis.
Shiba Inu launched the first phase of its decentralized autonomous organization (DAO) in December 2021, which allows the community to vote on decisions for crypto projects and rewards. The popular meme coin announced in February 2022 that it would be launching its own metaverse, code-named Shiberse, where gamers can purchase estates called Shiba Lands.
The Shiba Inu project has earned a safety score of 7.53 and a 'very good' rating as of 2022. SHIB scores more than 9/10 on 24-hour trading volume, 8.67 on trader sentiment, and 7.87 on community. Its awareness metric stands at 5.5 and its credibility metric is 5. Based on the SHIB coin's project risk profile, it's suited to be a smart investment decision in the long term.
Factors Affecting the Value of Cryptocurrency
Digital currencies typically aren't backed by a central authority the way that fiat currencies or government-sanctioned mediums of exchange are. Due to the decentralized nature of digital currencies, they derive value from other sources that include supply and demand, cost of production, availability on exchanges, competition, governance, and regulations.
Digital currency supply and demand affect its value. When demand increases faster than supply, the price soars up and vice versa. Each currency publishes its minting and burning plans to prevent the circulating supply from getting too big and slowing inflation. Demand often increases as a crypto project gains awareness or as utility increases. Greater adoption of a currency as an investment also increases demand because the circulating supply becomes more limited. The more Defi projects that are launched on the Ethereum blockchain, the more demand for ETH increases, which is necessary to perform transactions on the digital ledger.
The cost of producing new tokens affects the price. The process of mining uses a computer to verify the next block on the distributed ledger, and the protocol then produces an award in the form of tokens that go to the miners. A lot of computing power goes into verifying the digital ledger, and miners use a lot of powerful equipment and electricity to do so. The higher the mining costs, the higher the price of the digital currency.
The more cryptocurrency exchanges a currency is listed on, the higher the price will be. Any crypto exchange will list the most popular tokens, but only select exchanges offer smaller ones, which limits access for investors. Appearing on multiple exchanges increases the number of investors able to buy it. This increases demand and results in a high price.
New crypto projects are being launched daily and the barrier to entry is fairly low for new competitors. The viability of a digital currency depends on a network of users of that currency. A quick way to build a network is to create a useful application on the distributed ledger that improves on a competing application. As a new competitor gains momentum, the existing competition loses some value and the price lowers as the new coin price increases.
Internal governance affects the value of digital currencies. Developers adapt projects based on the community using them. Governance tokens give holders a say in a project's future, including the mining process and use. Any changes made to a token's governance must be met with consensus among stakeholders. Most investors prefer stable governance because things that are difficult to change can provide value in the form of more stable pricing.
The regulations surrounding the exchange of crypto assets are a bit confusing. The Securities and Exchange Commission (SEC) considers crypto assets as securities like stocks and bonds. The Commodity Features Trading Commission (CFTC) considers crypto assets as commodities like coffee and gold. Neither the SEC nor the CFTC can claim regulatory authority over cryptocurrency exchanges, however, regulation is necessary for easier trading of digital assets.
EFTs or futures contracts offer greater access to crypto for investors, which increases its value. Regulation could also allow investors to bet against the current price of digital currency with futures contracts or options, which would lead to better price discovery and reduced pricing volatility. There's potential that regulations could negatively impact the demand for digital currency and cause the price to fall. This could happen if a governing body changes current rules to no longer favor cryptocurrency investment or use.
The Future of the Shiba Inu Coin
While the Shiba Inu community is strong, project critics have expressed that the meme coin's lack of utility and competitive advantages will limit future performance. It's the most popular cryptocurrency on social media, but a lack of differentiation and competitive advantage makes Shib nothing more than an ERC-20 token built on the Ethereum blockchain. Analysts predict that Shiba Inu's value could reach $1 USD by 2025 if the project is capable of successfully launching Shibarium, metaverse, and significant coin burn.
Despite the substantial rise of Shiba Inu in the crypto space, the meme coin isn't necessarily a good investment. It's more important for investors to understand the asset they are buying and the factors that affect the future values, rather than focusing solely on price gains and the fear of missing out on early investment. Stocks are backed by assets and cash flow and investing in them means investing in the future performance of a business. If the business performs well, so will the stock investment. Crypto assets only make money if there are investors interested in paying holders for their coins. Traders win when another investor purchases crypto assets for a higher price due to optimism and speculation.
SHIB has a minuscule price, causing some traders to view the meme coin as an affordable lottery ticket. Similar to penny stocks, traders of SHIB think that even a one-cent increase in the coin price could result in an attractive profit. The coin could potentially reach a high price, but the odds against this happening in the near future are high.
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