Jefferies Cuts Bitcoin Exposure Over Quantum Computing Concerns, Shifts to Gold

Jefferies has removed bitcoin entirely from its well-known “GREED & Fear” model portfolio, reallocating the position to gold amid growing debate over the long-term impact of quantum computing on cryptocurrency security.

Christopher Wood, Jefferies’ global head of equity strategy, confirmed the move in a note shared Thursday. The portfolio’s previous 10% bitcoin allocation has been split evenly into a 5% holding in physical gold bullion and a 5% stake in gold-mining equities.

The decision does not reflect an expectation of an imminent bitcoin price shock. Instead, Wood framed it as a longer-term risk management call, particularly relevant for pension-style portfolios that prioritize durability and capital preservation.

“While GREED & Fear does not believe that the quantum issue is about to hit the bitcoin price dramatically in the near term, the store-of-value concept is clearly on less solid foundation from the standpoint of a long-term pension portfolio,” Wood wrote.

From digital gold to theoretical risk

Wood was among the early institutional voices to include bitcoin in diversified portfolios. During the pandemic-era stimulus cycle, he positioned the cryptocurrency as a digital alternative to gold, arguing that its fixed supply and improving custody infrastructure made it suitable for institutional investors. Bitcoin’s capped issuance, with the final coins expected to be mined around the year 2140, was central to that thesis.

That assumption is now facing increased scrutiny as advances in quantum computing accelerate. At the heart of the concern is whether sufficiently powerful quantum machines could one day break the cryptographic methods that secure bitcoin wallets and transactions.

Wood pointed to a May 2025 study by Chaincode Labs researchers Anthony Milton and Clara Shikhelman, which estimated that between 4 million and 10 million bitcoin, representing roughly 20% to 50% of the circulating supply, could be vulnerable to quantum-enabled key extraction. The researchers highlighted exchange-held and institutional wallets as particularly exposed, largely due to address reuse practices.

While the threat remains theoretical, Wood described it as “existential” to bitcoin’s role as a long-term store of value, especially when compared with assets like gold that do not rely on digital encryption.

Industry attention intensifies

Jefferies’ move comes as concern around quantum readiness is gaining momentum across the crypto and technology sectors. In February 2025, Microsoft unveiled its Majorana 1 quantum chip, a development that many researchers viewed as a meaningful step toward more practical quantum systems. The announcement reignited discussion around “Q-Day,” the point at which current encryption standards could become vulnerable.

Warnings have also emerged from within the crypto industry. In a January 6 LinkedIn post, David Duong, head of investment research at Coinbase Global, said that as much as 33% of bitcoin’s supply could be at heightened risk from quantum attacks. Duong highlighted reused addresses and early “Satoshi-era” wallets as especially exposed.

*** The Quantum Threat (Part 1) *** Bitcoin’s long-term security may be entering a new regime as quantum computing advances, even if the “quantum threat” is not immediate. Indeed, investors are… | David Duong, CFA

*** The Quantum Threat (Part 1) *** Bitcoin’s long-term security may be entering a new regime as quantum computing advances, even if the “quantum threat” is not immediate. Indeed, investors are becoming increasingly concerned that quantum computing risks may be approaching faster than previously thought. For example, BlackRock highlighted this in its iShares Bitcoin Trust ETF (IBIT) amended prospectus (filed May 9, 2025), while U.S. and EU agencies have been guiding critical infrastructure towards a migration to post-quantum cryptography (PQC) by the end of 2035. The reality is that quantum computing is poised to solve some of the world’s most complex problems – from medical discoveries to climate modeling. But it will also require upgrades to many of the cryptographic systems that we rely on today. Traditional finance may be among the most impacted due to its reliance on closed systems, but open protocols like Bitcoin and Ethereum are also actively preparing. The core risk emerges at “Q-day,” when cryptographically relevant quantum computers (CRQCs) could potentially run Shor’s and Grover’s Algorithms to undermine bitcoin’s cryptographic signature. That is, bitcoin’s security relies primarily on two cryptographic pillars: the Elliptic Curve Digital Signature Algorithm (ECDSA) for transaction signatures and SHA-256 for the proof-of-work mining processes. That means quantum computers actually pose two separate threats. They could potentially break the cryptographic security of private keys, allowing attackers to steal funds from vulnerable addresses, and they could potentially mine blocks more efficiently, disrupting bitcoin’s economic and security model. That said, we think quantum mining itself remains a lower-priority concern for now given scaling constraints, making signature migration the central issue. Practically, that first threat splits into two dimensions: long-range attacks against outputs whose public keys are already exposed onchain, and short-range attacks that could front-run spends as public keys appear in the mempool. As of block 900,000, roughly 6.51M BTC – or about 32.7% of supply – appears vulnerable to long-range quantum attacks, largely due to address reuse and script types that reveal public keys onchain. These include Pay-to-Public-Key (P2PK), bare multisig (P2MS), and Taproot (P2TR), with Satoshi-era coins a known subset of legacy P2PK outputs. Meanwhile, every output is vulnerable to short-range attacks at the moment of spending, which elevates the urgency of a broad migration toward quantum-resistant signatures even if the near-term probability of a successful attack remains low.

LinkedInDavid Duong, CFA

Institutional investors are taking note. In May 2025, BlackRock amended the prospectus for its iShares Bitcoin Trust ETF to explicitly flag quantum computing as a potential risk, signaling that the issue has moved beyond academic discussion and into mainstream financial disclosures.

Capital flows toward quantum defenses

As awareness grows, efforts to address the threat are also picking up pace. This week, Project Eleven raised $20 million in a Series A funding round led by Castle Island Ventures, valuing the company at $120 million. The firm aims to develop tools that can help secure blockchain networks against future quantum attacks.

Some sovereign holders are already adjusting their practices. Last August, El Salvador reorganized its bitcoin reserves across 14 separate addresses, citing improved security measures tied in part to emerging quantum risks.

The conversation extends beyond bitcoin. Ethereum co-founder Vitalik Buterin has outlined what he believes are the requirements for a quantum-safe Ethereum, including resistance to attacks on a century-scale timeframe. Buterin has argued that true quantum resilience is essential for any blockchain protocol that aims to operate independently without ongoing intervention from core developers.

A cautious shift, not a rejection

Jefferies’ reallocation does not suggest that bitcoin is facing an immediate crisis. Instead, it reflects a broader reassessment of long-term assumptions as technology evolves. For Wood, gold offers a simpler hedge against uncertainty, free from the technological dependencies that underpin digital assets.

The move underscores a growing divide in how investors view bitcoin: as a short- to medium-term risk asset with upside potential, or as a generational store of value expected to withstand decades of change.