3 cryptocurrencies to avoid like the plague in November
If you think the stock market has performed poorly over the past year, take a closer look at the cryptocurrency space. Since peaking at an aggregate valuation of around $3 trillion in the second week of November 2021, the total value of more than 21,600 digital currencies has fallen to less than $1 trillion, according to CoinMarketCap.com.
Although much of this value destruction can be attributed to Bitcoin and Ethereumwhich together account for nearly 57% of the total market capitalization of all cryptocurrencies, the real blame arguably lies with a host of other digital currency projects that have fallen short of expectations.
Although cryptocurrencies are still relatively young and constantly evolving, some projects and attachments are clearly bad news. The following are three popular cryptocurrencies to avoid like the plague in November.
The first high-level digital currency to keep your distance with in November is the Shiba Inu-inspired meme token Dogecoin (DOGE -2.83%). DOGE tokens are up over 100% since it became apparent that You’re here (TSLA -3.64%) CEO Elon Musk is reportedly closing his $44 billion deal to acquire social media site Twitter.
The reason DOGE holders are excited about this deal is that Musk has long been a fan of Dogecoin and has tweeted memes suggesting the token could “go to the moon.” Musk has previously appeared on Saturday Night Live as “Dogefather,” tweeted that he would work with developers to improve Dogecoin, and it is one of three cryptocurrencies the Tesla boss said he has in his wallet. Tesla even accepts DOGE as payment for certain goods.
But despite these fanciful catalysts, there’s nothing tangible in Dogecoin’s sails that can remotely justify its nearly $18 billion market capitalization.
The biggest problem for Dogecoin is that it is ultimately just a payment coin. There is nothing particularly special about its underlying blockchain technology that would make it stand out in a veritable sea of digital currencies that can be used as payment.
To follow up on this point, it’s not a particularly popular payout token either. Over the past 10+ months, Dogecoin has added less than 100 new merchants to the Cryptwerk online business directory. In fact, it took over eight years for DOGE to be accepted as a payment method by 2,000 mostly obscure merchants listed on Cryptwerk.
And as I’ve been pointing out for years, payout coins that offer historic gains in a short period of time almost always implode not much longer after. Even though DOGE is down as much as 93% from its all-time high in May 2021, history shows that most payout coin bubbles end in even steeper declines. Since Dogecoin offers no competitive advantage, history seems poised to win, once again.
The second digital currency to avoid like the plague in November is the gaming-focused token Axie Infinity (AXS -2.88%).
All I can say is what a difference a year makes, and oh how wrong I was! This time last year, Axie was the hottest thing in blockchain-based games. Users collected, raised, and battled monsters called Axies, earning various experience points along the way. In a six-month period ending in mid-January, Axie Infinity generated more than $1.2 billion in decentralized application protocol (dApp) revenue, according to data from TokenTerminal.com.
Another thing that helped Axie Infinity stand out at the time was allowing users to own their Axies via non-fungible tokens (NFTs). For decades, developers of PC and console games have retained the rights to all game creations. Blockchain-based games offered to change all that by giving users ownership of their creations, as well as the ability to monetize them.
But like I said, what difference does a year make. In the past 180 days, through November 2, 2022, Axie Infinity only brought in $1.6 million in dApp protocol revenue, according to TokenTerminal.com. The story is quite similar from Be[In]Crypto Research, which estimates that Axie Infinity’s revenue fell from $126.5 million in January 2022 to just $3.2 million in June 2022.
To add fuel to the fire, interest in NFTs as a tradable tool/store of value has effectively fallen off a cliff. According to data from Bloomberg, monthly NFT trading volume fell from $17.2 billion in January 2022 to $466.9 million in September 2022. That’s a 97% drop for those of you who keep the score at home, and significant harm to a game-focused company built on the idea of NFT character ownership and NFT marketplace transactions.
Although blockchain-based games may be popular in the future, Axie Infinity is completely avoidable right now.
The third popular cryptocurrency to avoid like the plague in November is the memecoin shiba inus (SHIB -1.76%).
Shiba Inu fame is that it provided what may well be the biggest single-year gain for an investable asset in history. Based on a starting value of $0.000000000073 per SHIB coin at the stroke of midnight on January 1, 2021, SHIB holders have found themselves with gains exceeding 121,000,000% as of October 27, 2021. Shiba Inu has eventually ended 2021 up around 46,000,000% after a pullback. On the contrary, it is digital currency that has shown how powerful fear of running out (FOMO) investing can be in the crypto space.
But just like Dogecoin, Shiba Inu lacks the competitive advantages and differentiation needed to stand out among over 21,600 (and counting) cryptocurrency projects. At its core, Shiba Inu is an ERC-20 token built on the Ethereum blockchain. Although Ethereum has been a popular choice among dApp developers, this popularity has resulted in relatively slow processing times and expensive transaction fees. Also, as stated earlier, payout coins are nothing special.
SHIB is also not a popular payment coin. Despite the buzz it creates on Twitter and message boards, the number of Shiba Inu merchants has barely budged this year on Cryptwerk (659, as of November 2022). This is likely due to the fact that SHIB tokens have fallen 91% in value over the past year and traders are unwilling to accept this wild volatility.
Although Shiba Inu developers intend to create blockchain-based games, the popularity of NFTs and blockchain-based games seems like a ship that has sailed. The buzz that SHIB has made big gains in 2021 simply can’t provide the same level of momentum anymore.
History being the enemy of meme coins, I would expect a much bigger pullback for a project that has yet to prove itself worth $6.7 billion – or even a fraction of that .