Why Ethereum Whales Are Buying Shiba Inu Hand Over Fist

Give the dog its due: Shiba Inu (SHIB -7.09%) has had some good news in recent days. And some of the credit goes to deep-pocketed Ethereum (ETH -3.55%) whales. These whales hold large amounts of Ether tokens but scoop up other cryptocurrencies at times as well.

Last week, Shiba Inu even regained its status as the largest holding other than Ether for the biggest Ethereum whales. Although USDCoin (USDC 0.09%) later jumped back into the top spot, this was a notable achievement. So why are Ethereum whales seemingly buying Shiba Inu hand over fist?

Incremental progress

First, it's appropriate to put the current buying levels into perspective. The expression "hand over fist" originally referred to making progress in climbing a rope. That's probably the best way to view the current scenario: incremental progress.

Shiba Inu hasn't returned to its high-flying ways seen throughout much of 2021. But a gain of more than 30% over the past week, driven by increased buying pressure, is certainly a positive for the beaten-down meme coin.

Although Ethereum whales now seem to view USDCoin as their favorite non-Ether cryptocurrency, Shiba Inu comes in as a close second. According to WhaleStats, USDCoin makes up 16.7% of the top Ethereum whales' holdings, excluding ETH, while Shiba Inu makes up nearly 14.4%. The No. 3 token -- FTX Token (FTT -5.96%) -- lags well behind, comprising around 10.4% of total holdings.

Reasons behind the whales' bullish behavior

It's not hard to figure out why Ethereum whales have bought cryptocurrencies in recent days. The performance of cryptocurrencies has loosely correlated with stocks so far this year, especially growth stocks. After a string of down weeks, the stock market rebounded somewhat last week.

But why were the whales specifically buying Shiba Inu? We can make some educated guesses.

The increasing burning of SHIB tokens likely ranks as one factor behind Ethereum whales' bullish behavior. Although the number of coins in circulation hasn't been dramatically reduced yet, an aggressive burning strategy could boost Shiba Inu's price over the long term.

There are also some potential catalysts for Shiba Inu on the way. Arguably the most important of these over the near term is that the Shibarium layer-2 solution is now expected to launch in the third quarter of 2022.

Also, the Shiba Inu metaverse is expected to launch later this year. Sales of virtual land in the metaverse are already underway.

In addition to these factors, don't discount the fact that Ethereum whales have had an attraction to Shiba Inu for a while. The meme coin has ranked among the top non-Ether holdings for Ethereum whales for months.

Still not out of the doghouse

Unfortunately for Shiba Inu holders, there's no guarantee that the recent rebound will continue. The macroeconomic concerns that have caused the stock market and cryptocurrencies to sink haven't gone away.

There are plenty of other cryptocurrencies that offer more real-world utility than Shiba Inu does. The introduction of Shibarium and the Shiba Inu metaverse could help, but they won't necessarily be game changers in comparison to rival tokens.

Some maintain that the meme coin remains a cryptocurrency to avoid. You don't have to agree with that position to know that, despite its improvement of late, Shiba Inu still isn't out of the doghouse.

(This article originally appeared in the Motley Fool.)

(Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Ethereum. The Motley Fool has a disclosure policy.)