Better Buy: Dogecoin, Shiba Inu, or Bitcoin?

The cryptocurrency industry plunged into a cold winter during 2022. The cumulative value of every coin and token in the market fell to just $828 billion, down from a peak of $3 trillion in 2021.

A string of high-profile collapses across the crypto industry -- headlined by the failure of the FTX exchange -- eroded investors' confidence and drove the losses. But the industry has emerged in a much stronger position, and the total value of all cryptocurrencies in the market now sits at a new record high of $3.5 trillion.

The industry's leading coins and the most speculative meme tokens alike have delivered gains in 2024. Dogecoin (CRYPTO: DOGE), Shiba Inu (CRYPTO: SHIB), and Bitcoin (CRYPTO: BTC) have logged returns of 362%, 146%, and 121% this year so far, respectively. So, which one is the better buy for investors?

Image source: Getty Images.

The case for Dogecoin

Dogecoin might be sitting on a 362% gain this year, but it's still trading below its record high of $0.73 from 2021. In fact, it was sitting near a 52-week low as recently as two months ago, but that all changed when former President Trump won reelection with the help of Tesla CEO Elon Musk.

Musk called Dogecoin his favorite cryptocurrency in 2021. He regularly promoted it on social media using memes, and he even participated in a Dogecoin-related comedy skit on Saturday Night Live on May 8, 2021. Unfortunately, the cryptocurrency plunged by 92% following that event, because investors realized Musk had no concrete plan to back up his support.

Simply put, Dogecoin's 2021 rally was built entirely on speculation, and this time doesn't appear to be any different. Following Trump's election win on Nov. 5, he announced the formation of a new U.S. government entity called the Department of Government Efficiency, or D.O.G.E for short. Musk himself is going to run it, and the D.O.G.E acronym is a reference to his favorite cryptocurrency.

That seems to be one of the driving forces behind Dogecoin's recent surge, even though there is no suggestion the token will play a role in the new government department. But even if Musk does find a use case for Dogecoin, it won't necessarily lead to more upside. In December 2021, he announced Tesla would accept the token as payment for certain items of merchandise, and that did little to stop its decline in value.

Right now, just 2,520 merchants worldwide accept Dogecoin as payment for goods and services (according to Cryptwerk), and many of them are obscure internet companies and online gambling platforms. In other words, the token has very little utility, and that's a big hurdle it needs to overcome in order to create sustainable value for investors.

The case for Shiba Inu

Shiba Inu rose to fame shortly after Dogecoin, and it delivered one of the best returns in the history of financial markets when it soared 45,278,000% in 2021. In other words, if you invested just $3 in the meme token on Jan. 1, 2021, your position would have been worth over $1 million on Dec. 31!

However, like Dogecoin, Shiba Inu went on to lose over 90% of its peak value in 2022. Speculative frenzies never last, and this meme token doesn't have a prominent figure like Elon Musk in its corner to keep investors interested.

Nevertheless, Shiba Inu has gained 146% in 2024 so far on the back of improving sentiment across the crypto industry, but it's still not even halfway to reclaiming its all-time high from 2021. The Shiba Inu community has tried to create new use cases for the token to support its value, but they haven't moved the needle. Developers even started building a metaverse in 2021, where investors could spend their Shiba Inu tokens to customize virtual blocks of land. However, three years on, the virtual world still hasn't launched.

Only 1,032 merchants worldwide accept Shiba Inu as payment for goods and services (according to Cryptwerk), so it has even less real-world utility than Dogecoin. As a result, don't be surprised if the latest rally eventually fizzles out.

The case for Bitcoin

Bitcoin is the world's largest cryptocurrency. It has a market capitalization of $1.9 trillion, so it makes up over half of the crypto industry's entire market cap on its own. With a year-to-date gain of 121%, Bitcoin might be up less than Dogecoin and Shiba Inu right now, but it's actually trading at a record high.

The industry-leading cryptocurrency doesn't necessarily have any additional utility compared to Dogecoin or Shiba Inu, because it isn't widely accepted as payment in the places consumers shop every day. However, Bitcoin has become a reliable store of value, with many experts likening it to a form of digital gold.

The U.S. Securities and Exchange Commission (SEC) has approved dozens of Bitcoin exchange-traded funds (ETFs) this year, which gives financial advisors and institutional investors a regulated way to own the cryptocurrency. The top 10 ETFs alone manage almost $100 billion in client money, and as that number continues to grow, it foreshadows further upside in the price of Bitcoin.

The value of above-ground gold reserves worldwide is currently $18 trillion. That might be an appropriate long-term target for Bitcoin's market cap if the wider investment community truly adopts it as a digital alternative to the shiny yellow metal. That implies a price-per-Bitcoin of around $909,000, which represents a potential 826% upside from where it trades as of this writing.

Some Wall Street analysts think it can go even higher in the long run. Cathie Wood's Ark Investment Management, for example, thinks the price of a single Bitcoin could rise to $1.48 million by 2030 based on eight potential factors. Adoption by institutional investors, and becoming digital gold, are just two of them.

The verdict

All three of these cryptocurrencies are speculative assets. Investors largely buy them in the hope of higher prices in the future.

However, Bitcoin probably has the best chance to deliver long-term upside for the reasons I highlighted. Despite several steep corrections over the last decade, it has always recovered to make new highs. The more often that happens, the more confident investors will become in its effectiveness as a store of value.

Dogecoin and Shiba Inu, on the other hand, haven't displayed that resilience, and it's unlikely either of them will win the support of regulators or institutional investors in the future. Therefore, proceed with caution if you're thinking about buying either of them.

Should you invest $1,000 in Dogecoin right now?

Before you buy stock in Dogecoin, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Dogecoin wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $839,060!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of November 25, 2024

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Tesla. The Motley Fool has a disclosure policy.