Jefferies' global equity strategy head, Christopher Wood, has removed a 10% allocation in Bitcoin from his model portfolio, citing concerns that advances in quantum computing could compromise the security of cryptocurrency and its viability as a long-term store of value for pension fund-type investors.
What happened: quantum concerns push for exit
Wood announced this decision in his newsletter "Greed & Fear."
He highlighted growing concerns within the Bitcoin community that quantum computing "might be just a few years away rather than a decade or more."
The Bitcoin network relies on cryptography to secure tokens and validate transactions. Current computers cannot break this cryptography in a practical manner.
Quantum computers could be game-changers, potentially allowing attackers to reconstruct private keys from public keys.
Wood wrote that any threat to the mining process "is potentially existential, as it undermines the concept of Bitcoin as a store of value and thus as a digital alternative to gold."
Wood was one of the early institutional supporters of cryptocurrency, having added it to her portfolio in December 2020, against a backdrop of pandemic-related stimulus measures and fears of dollar depreciation.
He raised this allocation to 10% in 2021. He is now replacing this weight in Bitcoin with a 5% allocation to physical gold and 5% to shares of gold mining companies.
Also read: XRP Matches Bitcoin And Ethereum In X Cashtag Queries, What's Driving The Social Interest Spike?
Why it matters: an intensifying debate
The debate over quantum threats to Bitcoin has intensified after the token's drop on October 10 of last year. Leading developers have disputed the idea that quantum computing poses an imminent risk.
Nic Carter, partner at Castle Island Ventures, stated in a post on X in December that Bitcoin developers are "in denial" regarding quantum risk. Adam Back from Blockstream rejected this characterization.
Justin Thaler, research partner at a16z and computer science professor at Georgetown University, published an analysis arguing that "deadlines leading to a cryptographically relevant quantum computer are frequently exaggerated — leading to calls for urgent and global transitions to post-quantum cryptography."
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