Sure, shiba inus (CRYPTO: SHIB) is down from its peak. Even with the strong sell-off, however, the digital token still soared over 32,500% in the last 12 months.
Some think it’s only a matter of time before Shiba Inu soar again. Could Cryptocurrency Even Help You Retire Early?
Of course it could
There is a simple answer to this question: of course it is possible. You don’t even have to be too creative to imagine how Shiba Inu could make enough money for investors to at least play a key role in facilitating early retirement.
Assume that the token can regain its all-time high on October 28, 2021. This would result in a gain of nearly 300%. A large initial investment with this kind of return would go a long way in raising enough money to retire early.
But is there a realistic path for Shiba Inu to quadruple or even more? May be. One of the major upcoming catalysts for the cryptocurrency is the launch of ShibaSwap 2.0. This new version of the decentralized crypto exchange will include a token burning mechanism.
Other potential catalysts include the deployment of Shibarium and the development of the Shibaverse. The first is a layer 2 solution which should reduce transaction fees for Shiba Inu. The latter is a metaverse based on SHIB.
Risk vs Reward
Just because something is possible doesn’t mean it’s probable. And the higher the probability of a positive return, the lower the return tends to be – and vice versa. Generally speaking, the higher the risk of an asset, the greater the potential reward.
Shiba Inu is a perfect example of this principle of risk versus reward. Investors who have made such breathtaking gains in the past by buying the digital token have taken a lot of risk. It paid off at the time, but there’s no guarantee that buying a Shiba Inu today will pay off in the future.
There’s good reason to think Shiba Inu aren’t as risky now as they were a year ago. The token is gaining more and more adoption. For example, a chain of cinemas AMC Entertainment now allows you to make online payments with Shiba Inu. Many other investors are now familiar with Shiba Inu, giving it an edge over lesser-known cryptocurrencies. However, this lower level of risk also reduces the likelihood of Shiba Inu producing ginormous returns in the future.
At the same time, however, Shiba Inu are still quite a risky asset to own. (Besides, it is not a contradiction to be less risky than in the past while having a high level of risk.) Competition between cryptocurrencies is intense. There are many rivals that offer superior blockchains and more real-world utility than Shiba Inu.
Be careful, think small
No reputable financial advisor would recommend anyone to bet heavily on Shiba Inu (or any other cryptocurrency, for that matter) in an effort to retire early. The risks are simply too great. It is possible that an investment in Shiba Inu could skyrocket. However, there is also a good chance that you will lose a lot of money and may even have to delay your retirement.
That said, however, it’s not necessarily a bad idea to invest a very small portion of an overall portfolio in high-risk assets. Cryptocurrencies such as Shiba Inu could be a higher risk asset that some aggressive investors find attractive.
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Keith Speights has no position in the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.