Christopher Wood has reduced the Bitcoin weighting in his model portfolio to zero, expressing concern that advances in quantum computing could weaken Bitcoin’s long-term security and its role as a “store of value” for institutional investors, according to Bloomberg.
Wood, who serves as the head of global equity strategy at Jefferies, has completely exited his Bitcoin position. This position was previously held at approximately 10% of the portfolio.
Quantum Computing Threat to Bitcoin's Security
In the latest edition of “Greed & Fear,” Wood highlighted that quantum computing is progressing at a faster pace than anticipated. He believes this development could undermine the argument that Bitcoin is a reliable store of value, particularly for long-term investors such as pension funds. Wood further noted that within the Bitcoin community, there is a growing apprehension that quantum computing could pose a significant threat not in a decade or more, but within the next few years.
The security of the Bitcoin network is fundamentally reliant on cryptography for transaction verification and asset protection. While current computing power makes breaking this encryption practically impossible, there is a theory that quantum computers could potentially enable the derivation of private keys from public keys. Wood characterizes this risk as “existential,” impacting not only transactions but also the cryptography underpinning the mining process, thereby casting doubt on Bitcoin's status as digital gold.
Historical Context and Portfolio Shift
Wood was an early institutional proponent of Bitcoin. In December 2020, citing concerns over expansionary economic policies implemented during the pandemic and the depreciation of the U.S. dollar, he incorporated Bitcoin into his model portfolio. By 2021, the weighting of Bitcoin had increased to 10%. Following his recent decision to remove Bitcoin entirely, he has reallocated this portion of the portfolio, allocating 5% to physical gold and 5% to gold mining stocks.
Broader Debate on Quantum Risk in Crypto
The discussion concerning the potential impact of quantum computing on cryptocurrency assets gained renewed attention after Bitcoin experienced a significant price drop on October 10 of the previous year. In a post on X (formerly Twitter) in December, Nic Carter suggested that some Bitcoin developers might be underestimating the quantum risk. This perspective has been met with disagreement from prominent Bitcoin advocates, including Adam Back.