Shiba Inu Can Deliver Bigger Upside Returns With Its Higher Volatility

Shiba Inu (CCC:SHIB-USD) has been falling for the past several months. At this point, it’s hard to know when the decline in SHIB will stop and the price will turn around.

For example, Shiba Inu peaked at $0.00008719 on Oct. 27, 2021. But as of mid-day Jan. 7, it’s trading at $0.00002917. This represents a decline of 66.5% from its peak.

That is a pretty dramatic drop for any kind of security. Moreover, since the end of November, when it was at a near-term peak of $0.0000538, SHIB has dropped 45.6%.

So, just about any way you look at it, this crypto has had a very rough time. Even since the end of 2021, when Shiba Inu was at $0.00003383, the token has dropped by 13.8%.

So the question arises whether this is going to continue for the rest of the year. My view is this is not likely.

Comparing Other Cryptos With Shiba Inu

At this point, it appears to me that SHIB is highly correlated to larger cryptos’ performance.

For example, Shiba Inu has a market value of $16.1 billion. Dogecoin (CCC:DOGE-USD), another meme crypto just like Shibu Inu, has a market capitalization of $20.56 billion as of Jan. 7. That is not that much higher than Shiba Inu’s. DOGE has also had a similar price performance.

Since the end of November, Dogecoin has fallen from $0.216 to $0.1548 as of Jan. 7. That is a decline of 28.33%. That is a little better than the 45.6% decline of Shibu Inu. But given that the latter has a smaller market cap and inherently higher volatility, this might be expected.

However, Ethereum (CCC:ETH-USD) has also had a miserable performance since the end of November. It is a much larger cryptocurrency with a market value of $380.16 billion.

However, at the end of November, it was trading significantly higher than today at $4,704.84 per token. By mid-day Jan. 7 it was trading at $3,189.68. That represents a decline of 32.2% in less than two months. However, Shibu Inu is still down much more.

So the truth is that Shiba Inu is correlated in the same direction as many similar and larger cryptos. This means it is moving down when those cryptos move down (and vice versa). But its variance — i.e., its standard deviation, or as investors in the market call it, the “beta” — is much higher.

What to Do Now With SHIB

Without a major catalyst for Shiba Inu on the horizon, the crypto may end up treading water for a good while.

It all depends, therefore, on the moves that some of the larger cryptos make this year. I suspect this means SHIB could move up much faster as well. After all, volatility works as a double-edged sword — both on the downside and the upside.

For example, Decrypt magazine reported on Dec. 22 that a crypto “whale” bought $136 million worth of Shiba Inu. It sent the token soaring by more than 16% in just a single day. That kind of action will likely spike once investors pile back into cryptocurrencies.

The turnaround from the dramatic selling at the beginning of this year could be eye-opening. I suspect the “whale” mentioned in the Decrypt article thought the turnaround was about to happen right after the beginning of the year.

They wanted to get in early. Little did they know that the selling would keep happening. But this is the kind of action to expect once the turnaround does occur. As a result, expect to see SHIB have a much higher performance than other cryptos.

On the date of publication, Mark R. Hake did not hold any position (either directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.