Buying Shiba Inu Seems Like a Better Bet Than Powerball
InvestorPlace - Stock Market News, Stock Advice & Trading Tips Despite the 50% run-up in Shiba Inu on Oct. 24, investors can still buy nearly 22,000 SHIB-USD for $1. That...
On Oct. 24, Shiba Inu (CCC:SHIB-USD) rocketed 50% higher to hit an all-time high. Trading at $0.00004589, $1 will buy nearly 22,000 SHIB-USD. Shiba Inu is setting all-time highs.
I have a retired friend who buys lottery tickets each week. Not a lot. Just what he can afford to lose. It’s one of his guilty pleasures. Most weeks, he wins a free ticket or two to lower his actual outlay.
I keep thinking he ought to buy Shiba Inu instead. He’d be so far ahead. I believe this is why the cryptocurrency is so popular. It’s like a lottery ticket that keeps on giving.
Until it doesn’t.
Things might look very positive for SHIB-USD at the moment, but it can turn in the blink of an eye. As the saying goes, “What goes up must come down.”
If transaction costs weren’t an issue and my friend asked if he should buy the token instead of lottery tickets, I’d say yes. But, for everyone else, I’d think twice if you’re investing money you can’t afford to lose.
Buying Shiba Inu for the Fun of It
The last time I wrote about the cryptocurrency was at the beginning of October. At the time, it had five zeros in front of its price and was trading at $0.00000928. It’s up more than 500% in a month.
If my friend bought $20 of Shiba Inu, he’d have a considerably higher than the return he usually gets from his lottery tickets.
However, if you look at the SHIB-USD chart for the past month, you’ll see that it’s had several significant corrections. For example, on Oct. 7, it lost 36% of its value in 14 hours, between 9 a.m. and 11 p.m.
Lottery tickets don’t have this kind of volatility. Furthermore, the level of expectation is much lower. As my friend’s theoretical Shiba Inu holdings increase in value, the wall of worry moves with it. As every day passes, what was intended to be a guilty pleasure becomes a persistent preoccupation. Eventually, it becomes a burden and is no longer fun.
At least with lottery tickets, my friend is supporting good causes – the Atlantic Lottery Corporation returned 346.5 million CAD ($280.1 million) to the four provincial governments in Atlantic Canada where we live – while Shiba Inu does little for these same communities.
So, not only is my friend ratcheting up his internal worry, but he’s also withdrawing his support for the community where he lives. It’s like billionaires such as Phil Knight avoiding taxes through grantor trusts and other avoidance schemes, although on a much smaller scale.
My InvestorPlace colleague David Moadel recently suggested that investors leave their logic at the door and buy a small amount for the fun of it.
“[T]here’s nothing wrong with buying a small amount of SHIB to see what happens. It may be best to put it in your account and not look at it for a while. Check back in a few years. Shiba Inu might actually reach a full penny by then, or it might not exist at all,” Moadel wrote on Oct. 22. “Either way, at least you took a chance on something fun and potentially profitable. If (Elon) Musk can do illogical things from time to time, so can you.”
Of course, my colleague referred to billionaire Musk’s past tweets about the 13th-largest cryptocurrency and the outsized influence they’ve had on Shiba Inu’s price movements.
Shiba Inu Still Has 4 Zeros
The amazing thing about the cryptocurrency is that it still has four zeros. Were it to go to a dollar, my friend’s $20 investment would be worth almost $26,000. So, was he to wait 10 years for this to happen, he’d still be looking at a compound annual growth rate of 104.6%.
With returns like that, it’s hard to argue with my colleague’s suggestion to throw caution to the wind and bet a few dollars. The only problem is that once an investor gets a taste of spectacular returns, they want more and more.
As a result, they increase the size of their bets, only to see the opposite happen, losing significant amounts in the process. It’s how problem gamblers get into trouble.
The most important rule of investing is to protect your capital. One of Warren Buffett’s favorite sayings is “Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1.”
It’s easy to think you won’t get carried away, but it happens all the time. Smart people make dumb mistakes with their money.
Shiba Inu might seem like a better bet than buying a lottery ticket. However, if mishandled, both can lead to severe financial distress.
Life is not a game. So please don’t treat your hard-earned capital like it is. Instead, only bet what you can afford to lose.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions 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.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
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