This section is Presented by PayPal
If you are not already invested in bitcoin, avoid the coins that start with S-H-I
There’s a widely used cryptocurrency term that starts with the letters S, H and I. While it is not shiba inu coin, its meaning does encompass it. I won’t write the term here, because it contains a common profanity, but you can probably guess what it is. (Did I mention it rhymes with bitcoin?)
The shiba inu coin was created last year, and like most cryptocurrencies, it began as nearly worthless. Now coins in circulation are worth some US$30 billion. Featuring the Japanese dog breed that is its name, shiba inu was branded as a “killer” of doge coin, an earlier cryptocurrency based on a meme of that same canine type. These coins have exploded in value largely because they are funny.
I do not consider that S-H-I term to be an insult, since I see 90 per cent of cryptocurrencies to be such coins. I personally do find these canine coins humorous and their emblematic dogs cute. But this space is now awash with new investors that take such coins seriously and hitch onto them their fortunes. For many, it will not end well, for when you profit by the hype, you will also lose by the hype. Even social media will tell you that, if you look closely.
There’s a story I’ve read on Reddit. Someone’s new-investor friend reveals a long-ago bitcoin purchase. That friend now has one whole coin. Excitement abounds — until the friend reveals, “The bitcoin I bought was Ethereum,” a network with a coin of far lower value. It brings to mind the people who call every soft drink a coke or every tablet an iPad. The uninitiated often think that the different coins, because of their existence as coins, must have something deeply in common with each other.
Such thinking overlooks the fact that the crypto world, worth some US$3 trillion at last count, is big enough that it cannot be painted with one brush. It’s such a truism that there are memes about this. In one, the first panel shows the traditional evolution picture of ape to human; the next panel is labelled “Bitcoin Twitter” and shows apes and humans, and half-apes and proto-humans, walking together.
The greatest thing about cryptocurrency is its egalitarianism. The field is new, and thus its people are all themselves new to some degree. Anyone can create a coin. But the bad thing about that is also that anyone can create a coin. In crypto time, it’s a story old as the hills.
The most memorable of such joke coins, to me, is Coinye West, created in 2014 in honour of the controversial hip-hop artiste. Kanye did not appreciate the humour and sent legal threats, practically killing the project. Life had imitated art in that Kanye, as a character in the animated comedy South Park, similarly does not get a joke and kills the comedian responsible.
Doge was also born around that time. Then the hype went up in 2017 when the Ethereum platform took off, making it even easier for people to create their own digital assets. Those were the days of the ICO (initial-coin offering). Projects would mint their own coins to sell them to raise money. There were more than 1,000 coins at the time, and projects raised a collective US$5.5 billion. Retail investors entered in droves, hunting for the “next bitcoin” and taking their cues from influencers often receiving money to promote projects. Fortunes were made one night and lost the next.
Then there were the actual malicious scams. I remember walking into an event in 2017 in which a promoter quoted Proverbs 3:5, “Trust in the Lord with all your heart and lean not on your own understanding.” That project, iPro Network, would raise US$26 million in a “fraudulent pyramid scheme,” according to the U.S. Securities and Exchange Commission. And who can forget the infamously meme-worthy bitconnect, whose coin dropped to US$1 from US$500?
A recent event, in fact, evokes that rather painfully. In October, the squid game coin, made in honour of the Netflix series, created practically overnight and without official endorsement, crashed to nearly zero from a height of US$2,860. The founders had programmed the coin to be unsellable for others, and when the value peaked, they sold all they had, tanking the price, and then absconded in a manoeuvre called a “rug pull.” In the words of Mark Twain, history is rhyming.
The likes of doge, created as a joke and with no malicious intent, are of course not in such camps. I do not judge such projects. But when I think of retail investors jumping into them, I always think of a Twitter story I read recently from a crypto journalist. He is getting a haircut, and a barber is talking about the subject. The journalist asks what news sources the barber reads. The barber says he does not read anything but instead watches a YouTube channel by “BitBoy.”
The coins are easy to buy, the memes are lighthearted, and in the current bull market, as shown in a recent case in Germany, even a hamster randomly picking coins can stumble into gains. But all of that masks the high stakes, the instability of the markets and the great discipline and market-savvy needed to separate the wheat from the chaff in the deeper parts of crypto.
New entrants need to understand that cryptocurrencies are one level into the unknown up from mainstream investing, and within crypto, the meme coins are another level up from the established ones. It’s OK to jump one level but never two. If you are not already invested in bitcoin, avoid the coins that start with S-H-I.
Ethan Lou is a journalist and the author of Once a Bitcoin Miner: Scandal and Turmoil in the Cryptocurrency Wild West
For more stories like this one, sign up for the FP Investor newsletter.
Sign up to receive the daily top stories from the Financial Post, a division of Postmedia Network Inc.
A welcome email is on its way. If you don’t see it, please check your junk folder.
The next issue of Financial Post Top Stories will soon be in your inbox.
We encountered an issue signing you up. Please try again
Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.
365 Bloor Street East, Toronto, Ontario, M4W 3L4
© 2021 Financial Post, a division of Postmedia Network Inc. All rights reserved. Unauthorized distribution, transmission or republication strictly prohibited.
This section is Presented by PayPal