Why Shiba Inu Surged Today, Then Plunged

What happened

Popular dog-themed digital currency Shiba Inu (CRYPTO:SHIB) has been volatile over the past day. Yesterday morning, this cryptocurrency surged as much as 12% on broadly positive momentum in the crypto sector as a whole. News that Shiba Inu has officially surpassed 1 million token holders appears to be partly responsible for this earlier surge.

And this morning, crypto exchange Phemex announced it would be adding support for Shiba Inu. This follows an announcement earlier this week that Singapore-based exchange Coinhako would be picking up the token as well.

However, risk assets have taken a beating today based on concerns that another coronavirus variant could slow growth in the near term. As of 1:30 p.m. ET today, Shiba Inu had sunk more than 13% over the previous 24 hours. 

Image source: Getty Images.

So what

For investors in any asset class, broader adoption is generally a good thing. So a more-speculative meme token like Shiba Inu is benefiting from growing interest among various exchanges in listing it. 

However, the rotation we’re seeing with capital moving out of more-speculative assets into safe havens is an obvious headwind for investors in Shiba Inu. Today’s marked shift in sentiment highlights the potential risks of holding on to these high-flying meme tokens. While some may remain bullish on the strong community behind Shiba Inu and its increasingly diverse investor base, it’s clear that risks are being priced into more-speculative assets to a degree they haven’t in some time. 

Now what

It appears investors in higher-risk, higher-reward assets have been looking for a reason to take profits for some time. Whether or not this new COVID-19 variant proves to be a significant macroeconomic risk, there’s certainly an appetite to take a little risk off the table today. For those holding Shiba Inu, that’s not good for the immediate outlook.

Where Shiba Inu goes from here remains to be seen. However, it’s clear that volatility is tilting toward the downside. Investors should certainly consider this with all their holdings.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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