Christopher Wood, global head of equity strategy at Jefferies, has removed Bitcoin from his long-standing “Greed & Fear” model portfolio, citing concerns about the long-term security risks posed by quantum computing. In his latest newsletter, Wood revealed that he previously held a 10% allocation to Bitcoin but has now reduced his exposure to zero, reallocating the funds into gold-related assets.
Despite Bitcoin’s impressive performance, rising over 300% since 2020, Wood’s decision was driven by concerns about the cryptocurrency’s security in the face of advancing quantum computing technology. He emphasized that the risk was not related to Bitcoin’s price movements or regulation but to its fundamental security structure.
Shift from Bitcoin to Gold
Following the shift, Wood’s portfolio now holds about 45% in physical gold and 25% in gold-mining stocks. His previous 10% Bitcoin allocation was split evenly, with 5% moved into physical gold and 5% into gold-mining equities. This strategic pivot reflects Wood’s growing belief in gold’s security as a store of value, especially in light of potential quantum computing risks to Bitcoin.
The Quantum Computing Risk to Bitcoin’s Security
Bitcoin’s security is based on cryptographic methods to secure wallets and transactions. While current computing power is incapable of breaking these encryption techniques, Wood warned that future quantum computing breakthroughs could undermine this security. Quantum computers could potentially derive private keys from public data, making Bitcoin’s cryptography vulnerable.
Wood noted that the possibility of cryptographically relevant quantum computers emerging in the next decade or two poses a significant concern for long-term investors, including pension funds and sovereign wealth managers. For these types of investors, even a low-probability risk to an asset’s core security could be enough to rethink its role as a long-term store of value.
Developer Disagreement Over Quantum Risk
The potential threat posed by quantum computing to Bitcoin has sparked a divide among developers. Nic Carter, a partner at Castle Island Ventures, commented in December that many Bitcoin developers are not taking the risks seriously. He noted that there is a clear gap between investors, who are actively seeking solutions to address quantum risks, and developers, who largely dismiss the concern. This divide, Carter argues, is already influencing market confidence in Bitcoin’s future security.
Debate Over the Timing and Real Risk of Quantum Computing
While the threat from quantum computing remains a topic of debate, many researchers argue that the risk is still decades away. Some developers believe Bitcoin can be upgraded with quantum-resistant cryptography well before any significant threat materializes. Furthermore, experts agree that quantum computing will pose challenges to more than just cryptocurrencies. Many digital systems, including banking, government networks, and broader internet infrastructure, will also need to adapt to quantum advancements.
