The long-term valuation of Bitcoin against gold is facing headwinds, according to on-chain analyst Willy Woo, as markets begin to price in the potential threat posed by quantum computing. Woo argues that awareness of the possibility of a future “Q-Day” – the point at which quantum computers become powerful enough to break current encryption – is already impacting investor sentiment.
Woo detailed his analysis in a post, noting a break in the 12-year trend of Bitcoin outperforming gold. He attributes this shift directly to the rising concern surrounding quantum computing’s potential to compromise Bitcoin’s security. The core of this concern lies in Bitcoin’s reliance on elliptic curve cryptography (ECDSA over secp256k1), which is theoretically vulnerable to Shor’s algorithm when executed on a sufficiently advanced quantum computer.
While a quantum computer capable of breaking Bitcoin’s encryption doesn’t yet exist, the potential reactivation of approximately 4 million “lost” Bitcoin is a key factor driving this valuation shift. These coins reside in wallets whose public keys are already exposed on the blockchain, making them prime targets should quantum computing reach the necessary level of sophistication. Woo estimates this represents 25-30% of the total Bitcoin supply.
The potential re-entry of these 4 million BTC into circulation is significant. Woo points out that, since , corporate entities like MicroStrategy and recent spot Bitcoin ETFs have collectively accumulated around 2.8 million BTC. The return of 4 million coins would therefore exceed that total, representing roughly eight years of accumulation at recent rates.
However, the Bitcoin network isn’t passively awaiting this potential threat. Woo estimates a 25% chance of a hard fork – a contentious upgrade to the Bitcoin protocol – to freeze these potentially vulnerable coins, preventing their access even if their private keys are compromised. Such a move would, however, raise fundamental questions about Bitcoin’s core principles of immutability and property rights, potentially creating a schism within the community between those prioritizing backward compatibility and those willing to rewrite rules to protect early holdings.
Despite the looming quantum threat, many core developers and cryptographers emphasize that Bitcoin is not facing an immediate crisis. They believe the network has time to adapt and is already moving towards a “post-quantum migration” – a gradual process of transitioning to new address formats and key management procedures. This migration won’t be a single, emergency hard fork, but a phased implementation over several years.
Other analysts, like Alex Gladstein, Chief Strategy Officer of the Human Rights Foundation, suggest that even if Q-Day arrives sooner than expected and these lost coins become accessible, they may not necessarily flood the market. Gladstein posits that a nation-state might hoard the recovered coins rather than immediately selling them.
Woo’s warning comes at a time when Bitcoin is trading nearly 50% below its all-time high, and quantum computing is transitioning from a niche concern to a mainstream risk factor in institutional investment portfolios. In , Christopher Wood, a strategist at Jefferies, removed Bitcoin from his flagship model portfolio and reallocated the funds to gold, explicitly citing the potential for cryptographically relevant quantum computers to undermine Bitcoin’s value proposition for pension-oriented investors.
The debate over Bitcoin’s quantum resilience highlights a fundamental tension within the cryptocurrency space: the balance between innovation, security, and the preservation of core principles. While the threat of quantum computing remains theoretical, its potential impact is forcing a serious conversation about the long-term future of Bitcoin and its role as a store of value.
The market appears to be acting on the assumption that there is a non-negligible probability of a significant amount of BTC – equivalent to approximately eight years of enterprise-level accumulation – re-entering circulation. This expectation is already being factored into the valuation of BTC relative to gold, according to Woo, effectively halting the long-term trend of Bitcoin gaining purchasing power against the precious metal.
