First off, I'm not a cryptocurrency basher by any stretch. I think there is value in some of the cryptocurrencies in the market. I just think there's quite a bit of speculation that needs to work its way out of the market at some point. For example, there are approximately 9,500 cryptocurrencies in existence today, and even the most bullish crypto believers agree that there's no need for nearly that many. In this Fool Live video clip, recorded on Dec. 7, I give my prediction for Bitcoin (BTC 5.81%) and the cryptocurrency market as a whole in 2022, and why I think this asset class could be ready to take a breather.
Matt Frankel: Cryptocurrencies are going to have a rough year in 2022.
Jason Moser: What makes you say that?
Matt Frankel: Along the same lines as my thoughts about growth stocks is that the appetite for speculation is just running out. Higher interest rates, things like that. It's going to cause investors to pump the brakes on speculation. It's going to trickle down to the cryptocurrency markets, because at the end of the day, cryptocurrencies and growth stocks are more linked than people like to think in terms of who invests in them. You're going to see a lot of investors start to pump the brakes. Since I wrote this article, Bitcoin's already down by like 10%. Technically, the clock starts in January.
Jason Moser: Somebody leaked the info. Someone leaked our show notes.
Matt Frankel: Tim just said it was my fault. But since the beginning of 2020, pre-pandemic, Bitcoin is up by about 700%, Ethereum is up by 3,400% since the beginning of 2020. That was already after a big multiyear rally. Look at a five- or six-year churn of Bitcoin, you'll be kicking yourself for not buying it. But I think that's going to start to run out. I think it's going to take a step backward. We got a surge of institutional interest in 2021. If I'm right and growth stocks have a rough year, you're also going to see a lot of institutions start to pump the brakes on crypto. I'm predicting a decline of 20% or more. I put a number on it, 20% or more in 2022.
Jason Moser: Well, you've quantified it. Crypto is just a tricky one. You're right. I think the risk profile is very similar, folks who are part of that growth movement. Very similar risk profile for those who invested in this cryptocurrency. It will be interesting to see maybe as 2022 unfolds if we see the tail ends of any stimulus and the impact that's had on helping people pad their bank accounts. Start to get people back to work, and those accounts become a little bit more depleted if maybe that tolerance for risk doesn't start to abate at some point in 2022 for somebody. You just don't see as much about crypto and meme stocks and things like that, but it'll certainly be stuff worth following for sure.
