Shiba Inu Investors Are Playing a Game They’re Bound to Lose

Much more than investing, those who buy Shiba Inu (CCC:SHIB-USD) are playing different types of games. For many people, these games will not have a good ending.

Also worth noting is that the cryptocurrency has some qualities in common with the troubled assets that proliferated heading into the financial crisis.

Of course, that story also had a decidedly negative outcome.

Investors in Shiba Inu are playing a  type of game that’s similar to the old “hot potato” contests.

Basically, as in the “hot potato” game, those who buy the cryptocurrency are hoping that they’re not holding it at the wrong time i.e. at the time when it inevitably starts collapsing.

Except, while only one person loses in hot potato, the Shiba Inu craze is likely to produce tens of thousands of losers. And instead of just losing a fun contest, some of those people will lose a great deal of money.

The retreat may be sparked by a variety of events, including a lack of new investors, a crackdown by government regulators, and/or a realization that the currency will not have any real utility over the long term.

The Cabbage Patch Kid Mind Game

Like many children of the early 1980s, I had a Cabbage Patch Kid. Basically, Cabbage Patch Kids were highly glorified dolls. They came with elaborate biographies, and children were told that they would be “adopting the dolls.”

But there was a catch. During the height of the craze when scarcity was high, the dolls cost something like $200 each. That’s probably somewhere in the neighborhood of $400 today.

I remember that parents, perhaps spurred by promises from the maker of the dolls, used to justify the ridiculous price by saying that the dolls were “investments” that would be “worth much more” sometime in the future.

Looking back, I don’t think that parents believed the investment hype deep down.

Similarly, deep down, I don’t think anyone believes that Shiba Inu — a dog currency created as a competitor to Dogecoin (CCC: DOGE-USD), which was launched as a joke –is going to become a major player in the blockchain space.

Another InvestorPlace columnist, Josh Enomoto, recently asked, “What makes {Shiba Inu’s} blockchain protocol better than the other 12,999 networks and iterations out there?”

Although I don’t know much about blockchain technology and Shiba Inu, my guess is that the answer to Enomoto’s question is, “Very little if anything,” just as very little if anything actually differentiated Cabbage Patch Kids from other dolls.

Shiba Inu bulls may point out that, unlike Cabbage Patch dolls, Shiba Inu has actually appreciated a great deal. That’s been true in the short term.

But my point is that both the parents who bought Cabbage Patch Kid dolls and the buyers of Shiba Inu today are deluding themselves into believing that they are making good longer-term investments. These delusions are a type of mind game.

On a positive note, both Cabbage Patch dolls and Shiba Inu dogs are cute.

Parallels With the Financial Crisis

There are also some parallels between the explosion of the Shiba Inu cryptocurrency and the 2008 financial crisis.

Just as those who bought the financial instruments based on subprime mortgages knew that their value was tremendously overinflated, most of those buying Shiba Inu know that it’s ludicrously overvalued.

And in 2006-2007, most people believed that the housing bubble would never burst, just as most people today expect the crypto bubble to never burst.

The Bottom Line on Shiba Inu

I believe that Shiba Inu is basically a game based on delusions, with no real underlying value. Therefore, I urge the owners of the currency to sell it.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015.  Among his highly successful, contrarian picks have been GE, solar stocks, and Plug Power. You can reach him on StockTwits at @larryramer.