Bitcoin's True Stress Test Is Yet to Come

For anyone concerned about bitcoin losing another 4 percent in October to post its third straight monthly loss, it's worth comparing that loss to those seen by traditional financial markets.

The general impression produced by last year's wild crypto bubble was that bitcoin and all other such tokens exist at the extreme end of the speculative class of assets.

If world markets become risk-averse, as they did severely last month, the thinking was that people would dump bitcoin along with every other high-risk asset in their flight to dollars.

The idea is that bitcoin is starting to assert itself as a new type of uncorrelated reserve asset, a digital gold for the digital age.

One way to think about it is to reflect on the changing nature of the bitcoin investment community, which can be divided into speculators and buy-and-holders - better known as hodlers.

The speculators who dominated the community last year have gone - certainly the newcomers who drove the bitcoin price to its ridiculous peak above $19,000 in December.

You see, here's the thing: This remaining community of hodlers may soon be the guinea pigs in a much more important bitcoin stress test.

Will these diehards resist liquidating their bitcoin assets then?

There might be a sizable amount of Wall Street money coming into bitcoin over the coming year.

It's another matter whether that provides the kind of stress test that bitcoin needs to prove itself as a reserve asset.