2022 Preview: What's in Store for Bitcoin?

There are some wild predictions of where Bitcoin (BTC -2.33%) could be headed from here. On this episode of "The Crypto Show" on Backstage Pass, The Motley Fool's Eric Bleeker and Fool.com contributor Chris MacDonald discuss the outlook for Bitcoin in 2022.

Eric Bleeker: Let's look ahead to 2022. We want to do some previews on some of the more popular cryptocurrencies just to assess where they stand today, and what some of the bull case and bear case concerns or what opportunities are for each cryptocurrency.

First, let's look at Bitcoin. As of today, Dec. 15, it is worth $895 billion, trades for a price of $47,300 per bitcoin. This week, we had an extreme bull case for Bitcoin with ARK Investment CEO Cathie Wood putting out a $550,000 price target. They are never shy. That is predicated on institutions moving 5% of their treasuries into Bitcoin over time.

Another bull case side for Bitcoin would be inflation continuing to be on the move with a 6.8% CPI [consumer price index] reading in November. Now, I should note, inflation might be a long-term driver, but as we're seeing with the causes, if it helps exacerbate a risk-off in the near term, that's probably more of a near-term negative to Bitcoin.

On the bear case side, we have significant rebound performance. If you look across the past two years, Bitcoin is still up more than 500%. Another thing I would put on here is continued limited traction in transactions, which doesn't necessarily have to be a bull case, but it's been something people would have probably looked at a lot more in Bitcoin just a few years ago.

Chris, I've put the summary out here for Bitcoin and it's preview. What are you looking for in the year ahead with Bitcoin?

Chris MacDonald: I think that's a pretty decent summary of it.

When you think about Bitcoin and the bull case behind it, Cathie Wood's aggressive target is based on those two factors, which, when you think about institutional money and capital flows into crypto, Bitcoin remains probably the top choice for institutional money managers to choose.

No. 1, because they won't be ridiculed for choosing Bitcoin. It's largely viewed as one of the more stable options, and it's got the longest track record of any cryptocurrency out there. It's the first and probably the best still in the market. There's more products out there for these managers to choose from to invest in Bitcoin. Right now there's Bitcoin futures ETFs in the U.S., and then in other markets around the world, they're moving to spot Bitcoin ETFs. There's going to be more avenues for institutional money managers to be able to trade, to get in and out of positions rather quickly, and there's more liquidity with Bitcoin than perhaps a lot of other cryptocurrencies.

Then the other bull thesis behind Bitcoin is it's view as a potential hedge to the markets with inflation going up. As you mentioned, inflation being at 6.8% -- that's extremely high. I think I was reading that was the highest since 1982. We're in a very interesting period of time right now where investors might want to reallocate capital to more-defensive asset classes. And the question is: Is Bitcoin that defensive asset class that people are going to move to?

In a way, its supply is fixed. I think 90% or so of all bitcoins have been mined right now. The number of bitcoins out there won't change. And if inflation keeps going up and weakens the U.S. dollar, it'll just simply cost more U.S. dollars to buy a bitcoin. On that fundamental basis alone the price of Bitcoin should go up relative to dollars, and that's the view that a lot of big-time money managers might have as not only an inflation hedge, but as a U.S. dollar currency hedge.

Eric Bleeker: I'm going to give you the opportunity right now to do it. Do you issue a $550,001 price target? Are you willing to top Cathie Wood right now?

Chris MacDonald: I don't think anyone can top Cathie Wood, really.