Senior financial strategist Christopher Wood said in the GREED & Fear newsletter that he’s removing the 10% Bitcoin allocation from his recommended portfolio. He justified this move by saying that advancements in quantum computing pose a threat to the cryptocurrency’s cryptographic protections, thus undermining its argument of durability through network security. According to Bloomberg, Wood recommends replacing Bitcoin with an investment with a 5% allocation to physical gold and another 5% set for gold mining stocks. Wood, who is the Global Head of Equity Strategy at the global investment banking firm Jefferies, first included Bitcoin in his sample portfolio in December 2020.
He then grew it to 10% in 2021, citing the fear of inflation because of the stimulus checks the government released during the height of the Covid-19 pandemic. However, advancements in quantum computing have long-term investors concerned about its implications, especially for cryptocurrencies. Bitcoin currently uses the SHA-256 hashing algorithm, which is technically impossible to crack with current computing technology. However, there have been reports as far back as 2022 that quantum computers could crack Bitcoin by the 2030s.
An event like this would cause chaos in the system, resulting in Bitcoin (and other cryptocurrencies) losing its value overnight, especially if the break comes as a surprise. Because of this, Wood recommended moving away from it, especially for long-term investors. Despite this, many cryptocurrency developers aren’t as concerned as Wood and other financial experts. For one, current quantum computing capabilities are nowhere near powerful or stable enough to defeat current cryptography algorithms, so they remain safe for the time being.
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