Cathie Wood of Ark Invest Just Delivered Fantastic News to Bitcoin Investors Everywhere

For the past two months, the crypto world has been buzzing over the potential "quantum threat" to Bitcoin (CRYPTO: BTC). Quantum computers could become so powerful in the future that they're able to break the cryptography of Bitcoin, sending it into a tailspin.

However, this panic is likely overblown. In a new report co-authored with Unchained, Cathie Wood of Ark Invest explains why investors shouldn't be overly concerned with the "quantum threat." Now is no time to dump your Bitcoin because of a threat that may or may not ever materialize.

What is the "quantum threat"?

In mid-January, investment bank Jefferies Financial Group (NYSE: JEF) warned that today's quantum computers were getting closer and closer to breaking the cryptography of Bitcoin. If that finally happened, there would be an enormous security risk to anyone holding Bitcoin. Overnight, your Bitcoin holdings might disappear, thanks to malicious hackers armed with super-powerful quantum computers.

As a result, Jefferies announced that it was dropping its suggested 10% portfolio allocation to Bitcoin. Instead, it advised clients to move 5% of their money into physical gold and another 5% into gold mining stocks. That's how scary the quantum threat might be.

Image source: Getty Images.

Just two months later, Wood is now suggesting that this scenario might be overhyped and way too speculative. For one, today's quantum computers are nowhere close to breaking the cryptography of Bitcoin. It might take them a decade or longer to reach that capability.

Second, today's Bitcoin developers are already aware of the problem and working on post-quantum cryptography. This potential security threat is a gradual, long-term problem, and not one that's going to manifest overnight.

Third, only approximately one-third of the current Bitcoin supply (6.9 million coins) is at risk. Of that total, 1.7 million coins are likely already lost or inaccessible. So the scale of the problem is likely much less than we are being led to think.

Fear, uncertainty, and doubt (FUD) in crypto

The "quantum threat" is just another example of the fear, uncertainty, and doubt (FUD) that pops up whenever sentiment in the crypto market is very low.

Keep in mind that the Crypto Fear & Greed Index has been below 20 (on a scale of 0 to 100) for much of the year. It's now at 29, so there's still a lot of fear in the market. That makes investors very vulnerable to any new narratives that feed into this fear, uncertainty, and doubt.

If you're thinking about buying Bitcoin, remember this: It's easy to lose conviction about any asset that has suddenly lost 45% of its value in a remarkably short period.

While I have a healthy regard for the power of quantum computers, I'm not dumping my Bitcoin over a theoretical security risk that may or may not ever materialize. The "quantum threat" reminds me a lot of the panic over "Y2K" (the "Millennium Bug"), which appeared in 1999. We all know how that turned out.

Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin and Jefferies Financial Group. The Motley Fool has a disclosure policy.