Wall Street strategist steps away from Bitcoin over quantum computer risks

Quantum computing’s threat to Bitcoin has made a Wall Street strategist step away from Bitcoin, insisting the technology is not far away from bringing down the security protocols used by blockchain networks as the world sees.

Christopher Wood, the global head of equity strategy at Jefferies, has removed Bitcoins from his model portfolio, ending a position he had once lauded as a hedge against monetary debasement.

Wood revealed he sold the coins in the latest edition of his Greed & Fear newsletter, where he said the forward steps quantum computing has taken threaten the foundations of Bitcoin’s investment case. 

Wall Street economist bids bye to Bitcoin due to quantum computing threat

According to Wood, who closely tracks global asset allocation trends, the risk quantum computing carries “could only be a few years away rather than a decade or more.” He believes this predicted timeline rendered Bitcoin undependable for investors who’d like to hold on to it for the long term.

The Jeffries global head of equity strategy was an early institutional backer of Bitcoin, placing the crypto in his model portfolio in December 2020. Governments at the time were advocating for a pandemic-era stimulus in reaction to jitters over currency debasement. 

Wood later expanded his position on the king coin to a 10% weighting in 2021, which has now been entirely removed. He replaced the Bitcoin exposure with a 5% allocation to gold and another 5% to gold-mining equities.

The strategist said any credible threat to Bitcoin’s cryptographic foundations would undermine its investment thesis, and risks to the mining and transaction validation system are “potentially existential as it undermines the concept of Bitcoin as a store of value and therefore as a digital alternative to gold.”

Why blockchain is facing trouble from quantum computers

Traditional computers process information using bits that exist in one of two states, zero or one. Quantum computers use qubits instead, which can exist as zero, one, or both at the same time through a property known as superposition.

This helps quantum systems evaluate many possibilities simultaneously, which peaks the sequential problem-solving computers do now. Moreover, the increase in computing power grows as more qubits are added, where two qubits can represent four values at once, three can represent eight, and the capacity continues doubling with each qubit.

Another problematic discourse for blockchain developers is entanglement, a phenomenon where qubits are linked so that measuring one instantly reveals information about another. Combined with superposition, entanglement could help quantum computers tackle complex mathematical problems and protect cryptographic systems.

Bitcoin uses cryptography to secure wallets, authorize transactions, and govern mining, and so far, breaking that cryptography is practically impossible. Quantum computers, however, could change that by enabling attackers to derive private keys from publicly visible ones on the blockchain.

If a private key can be reverse-engineered, hackers could theoretically move funds without the consent of the wallet owner. Coinbase global head of investment research David Duong estimated that 32.7% of Bitcoin’s circulating supply could be vulnerable to quantum attacks, Cryptopolitan reported.

“Bitcoin’s long-term security may be entering a new regime as quantum computing advances,” Duong wrote on LinkedIn. His research suggests that approximately 6.51 million BTC on block 900,000 might be exposed due to public keys already visible on the blockchain.

Nic Carter, a partner at Castle Island Ventures, said in a December post on X that Bitcoin developers are “in denial” about quantum computing risk. “Capital is concerned and looking for a solution. Devs are mainly in complete denial. Inability to even acknowledge quantum risk is already weighing on the price,” he wrote.

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