Christopher Wood, global head of equity strategy at Jefferies Financial Group, just cut Bitcoin (BTC +4.22%) from his model portfolio. Wood was early to the crypto party, first adding to his portfolio in 2020 and again in 2021. He has now pulled out altogether because of his belief in the possibility that quantum computing could undermine Bitcoin's security.
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Wood wrote in his recent weekly Greed & Fear investment newsletter that he had replaced his 10% position in Bitcoin with a mixture of gold and gold stocks. For him, the cryptocurrency can't act as a long-term store of value because quantum computing poses an "existential" threat. Worse, he believes it could come sooner than many developers believe.
Is Bitcoin's quantum computing risk real?
The risk posed by quantum computing has been talked about for some time. In 1994, a mathematician named Peter Shor published an algorithm that, if run on a powerful enough computer, could break the asymmetric cryptographic keys that are fundamental to Bitcoin's security.
Shor's algorithm can derive a private key from the public key that people use to make transactions. It's a bit like being able to derive your PIN from your bank account number. As yet, computers aren't powerful enough to do so. But quantum computing is moving fast and Q-day -- when it can undermine Bitcoin's encryption -- will come eventually.
A study by the professional services firm Deloitte showed that over 4 million bitcoins -- about a quarter of all the coins -- could be vulnerable to a quantum attack. That's about $370 billion's worth of the digital currency at today's prices.
If you're wondering why not all bitcoins are equally at risk, it's because security was not as evolved in the early days. Without getting too technical, when the crypto was launched, people could see the public key when making transactions. Later, they could only see an encoded version of it.
The risk is real, though there are ways to protect the vulnerable addresses. The bigger question is timing: Bitcoin developers think we have five to ten years or more before Q-day comes. Wood thinks it could be a matter of years.
Is the quantum computing risk overstated?
Before you follow Wood's example and sell your crypto, there are a few things to consider. Firstly, developers are working on solutions. Quantum developments are inevitable, but the risk is not. There's already a quantum-proofing plan on the table called the Bitcoin Improvement Proposal (BIP)-360, which would involve a gradual migration to safe wallet addresses.
That migration brings both organizational and governance challenges. Some wallets are inaccessible because people have lost the passwords, for example, and there isn't yet consensus around how to make them safe. Plus, the community is split on how urgent the threat is, and whether BIP-360 is the best solution.
Secondly, cryptocurrency is not the only industry that quantum developments could affect. We're talking about dramatic technological breakthroughs that could also undermine the security protocols of financial institutions.
One risk, known as "harvest now, decrypt later," is that hackers are already storing large amounts of data to decode once the tech evolves. Citigroup says that the economic impact of a single-day attack on one of the biggest U.S. banks could come to between $2 trillion and $3.3 trillion. In that context, Bitcoin is small potatoes.
Lastly, it won't happen overnight. Long-term investors can keep the risk on their radar and reduce their exposure to Bitcoin if developers are unable to develop effective quantum safeguards. Token holders can also monitor institutional moves and actively push for solutions. After all, Bitcoin is a decentralized network, and holders, miners, and node operators have a say in how it's run.
Don't ignore quantum computing ... but don't panic, either
Cryptocurrency is a risky investment, which is why it should make up only a small percentage of your portfolio. It is a relatively young asset that's volatile, speculative, and susceptible to regulatory changes. Quantum computing is another risk to consider, particularly if you bought Bitcoin because you see it as a form of digital gold.
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Key Data Points
Bitcoin has mostly held its head above the $90,000 level this year, and so far the risk of Q-day does not appear to be a major near-term headwind. That said, it is worrying to see institutional investors like Wood moving away from the crypto because of the quantum risk.
Institutional investment has helped push the leading cryptocurrency to new highs in 2025 and will be crucial to its long-term growth. However, panic investment decisions rarely pan out. There's a good chance that a solution will be forthcoming. And if it isn't, investors still have time to plan their exit.
