Jefferies' Chief Strategist Removes Bitcoin Allocation Due to Quantum Computing Risk

Christopher Wood, Jefferies’ global head of equity strategy, has removed a 10% Bitcoin allocation from his model portfolio. The decision was made in response to concerns about quantum computing threatening the cryptographic security of Bitcoin. Wood cited sustained advancements in quantum computing as a potential long-term risk to Bitcoin’s viability as a store of value.

Wood’s removal of Bitcoin from his portfolio aligns with growing institutional awareness of quantum computing risks. In his latest 'Greed & Fear' newsletter, he explained that quantum computing could weaken Bitcoin’s argument as a reliable long-term asset. The risk is being increasingly factored into mainstream investment strategies.

The move reflects broader concerns about quantum computing's ability to undermine cryptographic protocols. Bitcoin’s blockchain relies on cryptography to secure transactions and prevent fraud. Quantum computers could theoretically reverse-engineer private keys, making the network more vulnerable.

Why Did This Happen?

Jefferies’ decision highlights a shift in how institutional investors are assessing long-term risks. Wood, an early institutional supporter of Bitcoin, had previously increased the allocation to 10% in 2021. However, he now views quantum computing as a critical threat to Bitcoin’s status as a digital gold alternative.

The concern is not new, but recent developments in quantum computing have increased urgency. Some experts estimate that quantum computing could pose a real threat within a few years rather than a decade or more. Wood’s action signals that institutional investors are now actively incorporating quantum computing risks into their asset allocation decisions.

How Did Markets React?

Market reactions to the news have been mixed. Bitcoin prices have fluctuated in recent weeks, but no direct correlation has been observed between the price movement and Wood’s decision. Analysts suggest the broader market is still digesting the implications of quantum computing risks for digital assets.

Meanwhile, quantum computing stocks have drawn attention from Wall Street. Rigetti Computing and Quantum Computing have both been upgraded to 'Buy' ratings by Rosenblatt Securities. The analysts argue that quantum computing remains a high-growth sector with long-term potential despite current challenges.

What Are Analysts Watching Next?

Analysts are closely watching how institutional investors respond to the quantum computing risk. The removal of Bitcoin from a high-profile model portfolio may trigger further reallocations toward more established assets like physical gold or gold-mining stocks. The broader crypto market has also been affected.

While Bitcoin continues to attract institutional buying, smaller altcoins have seen more volatility. The market is still adjusting to regulatory developments, including the EU's MiCA framework, which is shaping how traditional banks approach digital assets. According to reports, the framework is influencing institutional investment decisions.

Post-quantum cryptography is also gaining attention as a potential solution. Experts warn that financial institutions must begin adopting quantum-resistant cryptographic protocols to protect against future threats. Dr. David Utzke of QuEra Research has emphasized the urgency of preparing for a quantum future.

The debate over quantum computing risks has intensified in the crypto community. While some developers remain skeptical, others are actively working on solutions. The uncertainty reflects the broader challenge of balancing innovation with security in a rapidly evolving technological landscape.

For now, investors are advised to monitor both technological and regulatory developments. Quantum computing remains a nascent field, but its potential impact on digital assets is becoming a central concern for institutional investors. The coming months will likely reveal more about how the market adapts to these emerging risks.