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Better Cryptocurrency To Buy With $1,000 Right Now: Dogecoin Vs. Shiba Inu
It's true that both Dogecoin (CRYPTO: DOGE) and Shiba Inu (CRYPTO: SHIB) are meme coins based around cute pictures of dogs, but the two cryptocurrencies have differing factors driving their prices.
In fact, there's a clear winner in the match between these two pups, so let's examine their characteristics and figure out which one is more deserving of your $1,000 investment.
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There's more than one key difference here
With a market cap of $36.5 billion, it's no surprise Dogecoin is known as the king of the meme coins. It has widespread name recognition, many thousands of holders, and the special status of being the first major meme coin to go to the moon multiple times. Soon, it may be included in an exchange-traded fund (ETF), and so might Shiba Inu.
There's a very good chance that Dogecoin will still be an important cryptocurrency 10 years from now, as it has already survived longer than anything else in its asset class. There's no substitute for its vintage, and Shiba Inu, while also highly likely to stick around, will simply never have the same set of distinctions as its older peer.
More importantly, Shiba Inu's relationship with other major cryptocurrencies is decidedly different than Dogecoin's, and, at least for the time being, it's positioned significantly for the worse. Take a look at this chart:
Dogecoin Price data by YCharts.
As you can see, the price of Dogecoin is, on average, fairly correlated with the price of Bitcoin. Shiba Inu, on the other hand, moves in a tight correlation with Ethereum, the chain where it's hosted.
There's nothing inherently wrong with Shiba Inu's high correlation with Ethereum. The issue is that Ethereum itself is, at least in recent times, not performing as well as Shiba Inu's holders would hope.
Take a gander at the price action of Bitcoin and Ethereum over the last three years:
Bitcoin Price data by YCharts.
Why did the price of Bitcoin diverge and go higher after the pair were so closely connected for so long?
There's probably more than one answer to that question, but for investors, the fact of the matter is that the divergence does not appear to be bullish for Ethereum, as the asset has started to consistently underperform Bitcoin. And, as Shiba Inu's price is highly correlated to Ethereum's price, that means it likely doesn't have as much upside in store until the dynamic between Bitcoin and Ethereum changes again. There's no telling when that will happen, if it ever does.
In contrast, Bitcoin's price will probably continue to trend upward over the long term thanks to its halving schedule. So, assuming the correlation with Dogecoin persists for another 10 years, there will be an upward pressure on Doge's price whenever Bitcoin gets harder to mine. There's no such relationship to lean on with Shiba Inu, and that's why it's more likely to underperform Dogecoin.
Consider whether you should be investing in these assets at all
So for the time being, Dogecoin is the better meme coin to invest your $1,000 in compared to Shiba Inu.
You'll still need to take care to avoid making a handful of easy-to-make mistakes if you want to turn your $1,000 into $10,000 or more. And there's no guarantee of success, even if you are willing to hold onto these tokens for a handful of years -- a new shiny thing could always come along and unseat these assets, even if it hasn't happened yet. But that begs the question of what else you could be doing with that same $1,000 other than investing it in a highly speculative meme coin.
If you haven't already diversified your portfolio with a mixture of bonds, safe stocks, more aggressive stocks, safe cryptocurrencies, and somewhat more aggressive cryptocurrencies, you haven't met the financial prerequisites to invest in Dogecoin at all. Put the money you have in hand toward building a foundation for your financial life before trying to reach for the highest-hanging fruit on the tree.
Nonetheless, if your primary investment goals are already taken care of, chasing a risky, but potentially handsome, growth by buying Dogecoin should be fine. Just be aware that the meme probably won't seem as funny if your investment is underwater.
Should you invest $1,000 in Dogecoin right now?
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Alex Carchidi has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
