Welcome to our institutional newsletter, Crypto Long Short. This week:
- Martin Gaspar on How Bitcoin Can Overcome Quantum Fear, Echoing Past Climate Rally
- Headlines Institutions Should Watch By Francisco Rodrigues
- Aave’s revenue multiple hits 2024 lows despite higher prices on charts this week
Thank you for joining us!
-Alexandra Levis
Expert insights
Why Bitcoin’s Quantum Fear Will Pass Like the Climate Panic
Author: Martin Gaspar, Senior Cryptocurrency Market Strategist at FalconX
Quantum has become a major theme in cryptocurrencies over the past few months, in part due to technological developments in the space, but also as investors look for potential culprits in crypto price stagnation after October. Quantum risks could become an existential threat to Bitcoin Consider the possibility of bad actors hacking legacy accounts like Satoshi Nakamoto’s. However, a clearer understanding of the threat and an increasing industry focus on solutions are driving proactive solutions.
This bears a striking resemblance to concerns over the energy use and climate impact of Bitcoin’s proof-of-work (PoW) mining that dominated headlines in 2021. These issues also feel existential, as the headline risks make BTC socially unacceptable. While industry insiders knew climate concerns were misguided (Bitcoin’s energy footprint is low compared to other industries like tech data centers), concerns persisted, and Tesla eventually dropped Bitcoin as a payment option due to climate risks. At the time, Elon Musk’s support for Bitcoin was a big driver of sentiment, so the move shocked the market. If the far-sighted Elon deems the issue meaningful enough for him to no longer support Bitcoin, more conservative groups may seek to ban Bitcoin or otherwise stifle Bitcoin adoption. From an investor’s perspective, why would you buy an asset with such risk? This question resonates today and is even more important as falling cryptocurrency prices impact market sentiment.
The good news is that the industry can overcome this problem. In 2021, industry leader Strategy took the initiative to work with BTC miners to publish renewable energy portfolio statistics on their energy consumption. While it’s no secret to the crypto community that Bitcoin miners naturally seek the lowest-cost energy source (usually renewables), collating hard data can help convince naysayers. The industry can regain credibility and help allay concerns.
We see the same results when industry stalwarts come together to publish the facts about quantum risks. Coinbase recently established a Quantum Computing and Blockchain Working Group, which will help advise industry participants on guarding against quantum risks and provide analysis of quantum breakthroughs. Additionally, on February 5, as BTC plunged towards $60,000, Strategy announced a quantum security initiative during an earnings call that could help prevent further sell-offs. It aims to coordinate with the “global network, cryptocurrency and Bitcoin security community” to aid Bitcoin’s quantum transition.
Meanwhile, several startups are working on developing post-quantum technologies for blockchain, such as Project Eleven and BTQ Technologies. These developments indicate that the cryptocurrency community is quickly seeking solutions and should help alleviate near-term concerns.
BTC will turn a new leaf with its aggressive efforts to dispel quantum hysteria. Once the industry releases clear facts and reasonable plans, this issue will become a reality, much like the PoW climate has been up in the air for the past few years.
This week’s top stories
Francisco Rodriguez
Geopolitical risks have shown again this week that liquidity in the cryptocurrency space means investors will exit as quickly as possible. A new round of conflict in the Middle East has led to a massive outflow of money from Iran, while U.S. investors have also retreated. Still, builders don’t appear to be proceeding in phases.
Chart of the Week
Aave’s revenue multiple hits 2024 lows despite rising prices
Aave is currently undergoing a fundamental valuation reset: while the token price is still above its 2024 lows, the FDV/annual revenue ratio has fallen back to these levels (
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Note: The views expressed in this column are those of the author and do not necessarily reflect the views of CoinDesk, Inc., CoinDesk Indices, or its owners and affiliates.