Quantum computing is the newest buzzword in Silicon Valley right now, with many tech companies already working on building a quantum environment that could shape the new frontier of computing. In the midst of this quantum rush, Jefferies has given a rather stark warning on Bitcoin, arguing that the advent of quantum computing poses an existential threat to Bitcoin mining.
In Jefferies' latest Greed & Fear note, Christopher Wood, global head of equity strategy, warned that "cryptographically relevant quantum computers" (CRQCs) could have a major impact on blockchain, potentially collapsing the mathematical asymmetry. While traditional supercomputers would need trillions of years to crack a private key, a quantum computer could do so in "mere hours or days".
Jefferies cites estimates that 20-50% of all Bitcoin in circulation right now, amounting to anywhere between 4 million to 10 million Bitcoin units, is currently vulnerable to theft. The most significant risks involve "Sathoshi-era" holdings and institutional addresses that use "address-reuse", which exposes public keys to quantum-enabled discovery.
This kind of threat has sparked fears within the Bitcoin community about whether to 'burn' vulnerable coins to preserve the system's integrity. While some argue that the move would protect the network, others claim such a move would be confiscatory and violate fundamental property rights.
"Clearly any threat to the quantitative tightening dynamic enshrined in Bitcoin... is potentially existential," Wood wrote.
In light of these long-term concerns, Jefferies announced it is removing its 10% Bitcoin allocation from its long-only pension portfolio. The firm is reallocating those funds equally into physical gold and gold-mining stocks, citing gold's status as a historically stress-tested store of value.
Despite the warning, Jefferies noted that Bitcoin remains up 325% since the firm's initial December 2020 allocation.
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