Jefferies (NYSE: JEF) equity strategist Christopher Wood has removed Bitcoin from his model portfolio, citing concerns that advances in quantum computing could eventually threaten the cryptocurrency’s security and weaken its appeal as a long-term store of value. Wood, Jefferies’ global head of equity strategy, previously held a 10% Bitcoin allocation in his “Greed & Fear” model portfolio. In his latest newsletter update, he said the development of quantum computing may no longer be a distant risk and could arrive sooner than many investors expect.

Bitcoin’s network relies on cryptography to secure wallets and validate transactions. While breaking that encryption is considered practically impossible using conventional computing, quantum machines could potentially make it easier to reverse-engineer private keys from public keys, creating a new security risk for digital assets.

Wood wrote that the possibility of quantum computing undermining Bitcoin’s cryptographic foundation could weaken the argument that the token can serve as a dependable store of value, particularly for long-term investors such as pensions. Wood was an early institutional supporter of Bitcoin, adding it to his model portfolio in December 2020 and later increasing the allocation to 10%. He is now reallocating that exposure into gold-related assets, replacing the Bitcoin weighting with a 5% allocation to physical gold and 5% to gold-mining stocks.

The debate over quantum computing and cryptocurrency security has intensified in recent months, with some investors warning that the risk may be closer than previously assumed. Wood said the long-term questions raised by quantum computing strengthen the case for gold as a hedge, given its historical track record.

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Jefferies Financial Group Inc. (NYSE: JEF) is a global investment banking and capital markets firm that provides advisory, sales and trading, underwriting, and asset management services to corporate, institutional, and government clients worldwide.