The firm's senior financial strategist is concerned the advancements in the field of quantum computing will break Bitcoin.
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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.
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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. Besides that, progress in the field of quantum computing is slow and public, meaning developers would have ample warning that they need to upgrade their algorithms.
Another big reason that cryptocurrencies aren’t particularly concerned about quantum computing right now is that if quantum computers can break Bitcoin security, then they can break cryptography algorithms all across the world. So, if their security protocols were to be broken, then the security of everything else — including traditional banking systems, secured internet protocols, government encryption, and more — will also be affected. Besides, security developers are already looking into post-quantum cryptography, with cryptocurrency developers able to take advantage of their developments as well.
Despite this, Wood says that the debate between cryptocurrency developers and quantum computing will only be a “long-term positive for gold.” It has historically held its value, reaching an 11% annual return over the past 50 years. So, investors looking for a stable, long-term asset to park their funds would probably find the precious metal an attractive option.
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Key considerations
- Investor positioning can change fast
- Volatility remains possible near catalysts
- Macro rates and liquidity can dominate flows
Reference reading
- https://www.tomshardware.com/tech-industry/cryptocurrency/SPONSORED_LINK_URL
- https://www.tomshardware.com/tech-industry/cryptocurrency/fear-that-quantum-computing-on-the-cusp-of-cracking-cryptocurrencys-encryption-spurs-a-global-investment-firm-to-remove-bitcoin-from-recommendations#main
- https://www.tomshardware.com
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