Jefferies strategist Christopher Wood drops bitcoin for gold on quantum computing concern

Christopher Wood, Jefferies’ global head of equity strategy, removed a 10% allocation to bitcoin BTC$76,652.95 from his model portfolio, saying advances in quantum computing could eventually weaken the Bitcoin blockchain’s security and, by extension, its appeal as a long-term store of value.

Wood reported the change in his “Greed & Fear” newsletter, as reported by Bloomberg, and replaced the bitcoin with a 5% allocation to physical gold and 5% to gold-mining stocks.

Wood added bitcoin to the model portfolio in late 2020 and increased exposure in 2021, arguing it could serve as an alternative to gold as governments pumped stimulus into the economy. He is now leaning back toward assets with longer track records.

The concern is simple. Bitcoin relies on cryptography to secure wallets and authorize transfers. Current computers cannot realistically break those protections. But future machines exploiting features of quantum mechanics could make it easier to work backward from public information to the private keys that are used to authorize transactions.

Read more: Quantum computing threatens the $2 trillion Bitcoin network. BTQ Technologies says it has a defense.

Many bitcoin developers say the threat is not near-term. Some, including longtime developer Jameson Lopp, have argued that quantum risk remains years away and any serious transition would take time.

“No, quantum computers won't break Bitcoin in the near future,” Lopp said in December, adding that making protocol changes and moving funds to new formats “could easily take 5 to 10 years.”

The topic has also begun to attract funding. This week, Project Eleven said it raised $20 million to build post-quantum tooling for blockchains and institutions, including readiness assessments and migration testing.

Likewise, Wood’s shift is not a not signal that quantum computing is an immediate threat to bitcoin. It does show that long-term security questions are beginning to influence how some investors think about allocations.

UPDATE (Jan. 16, 13:52 UTC): Changes lead image.