Welcome to our institutional newsletter, Crypto Long & Short. This week:
- Martin Gaspar explains how Bitcoin seeks to overcome quantum fears, echoing past climate backlash
- The headlines institutions should pay attention to by Francisco Rodrigues
- Aave Revenue Multiples Hit 2024 Low Despite Rising Prices in Chart of the Week
Thanks for joining us!
-Alexandra Lévis
Expert Views
Why Bitcoin Quantum Fears Will Disappear Just Like Climate Panic
By Martin Gaspar, Senior Crypto Market Strategist, FalconX
Quantum has become a major theme for crypto in recent months, partly because of technological developments in the area, but also because investors are looking for potential culprits for crypto price stagnation after October. Quantum risk may emerge as an existential threat to Bitcoin given the possibility of bad actors hacking into existing accounts such as Satoshi’s. However, a better understanding of the threat and increasing industry focus on solutions are leading to a positive resolution.
There are striking parallels to concerns about the energy consumption and climate impact of Bitcoin’s proof-of-work (PoW) mining that dominated headlines in 2021. These concerns also seemed existential, as the major risk made BTC socially unacceptable. Although industry insiders knew climate concerns were misguided (compared to other sectors, such as tech data centers, BTC’s energy footprint is small), the fears continued, culminating in Tesla abandoning BTC as a payment option due to climate risk. At the time, Elon Musk’s support for BTC was a major sentiment driver, so this action surprised the market. If the forward-thinking Elon thought the issue was important enough to withdraw his support for BTC, more conservative groups might seek to ban it or stifle BTC adoption. From an investor’s perspective, why would you buy an asset with such risk? This question resonates today and is particularly relevant as falling cryptocurrency prices weigh on sentiment.
The good news is that the industry can overcome this problem. In 2021, it took industry leader Strategy to take the initiative to work with BTC miners to publish statistics on the renewable mix of their energy consumption. Although it was no secret to the crypto community that BTC miners naturally seek the lowest cost of energy, which is often renewable, compiling hard data helped convince the naysayers. The industry was able to regain credibility and help allay concerns.
We see the same phenomenon when industry stalwarts come together to publish facts about quantum risk. Coinbase recently established a Quantum Computing and Blockchain Working Group, which will help make recommendations to industry participants to protect against quantum risks and provide analysis of quantum advancements. Additionally, on February 5, when BTC was selling heavily at $60,000, Strategy announced a quantum security program during its earnings call, which could have helped curb further selling. It aims to coordinate with the “global cyber, crypto and Bitcoin security community” to help with Bitcoin’s quantum transition.
At the same time, several startups are working on the development of post-quantum technologies for blockchains, such as Project Eleven and BTQ Technologies. These developments indicate that the crypto community is working quickly to find solutions and should help alleviate concerns in the near term.
BTC is poised to turn the corner with its proactive efforts to dispel quantum hysteria. Once the industry releases clear facts and a plausible plan, this problem will come true, just like the PoW climate surplus of years past.
Headlines of the week
Francisco Rodrigues
Geopolitical risks showed once again this week that liquidity in the cryptocurrency space means investors are heading for the exit as soon as they can. Renewed conflict in the Middle East has led to large capital flows from Iran, while investors in the United States have also retreated. However, manufacturers do not seem to be in phase.
Chart of the week
Aave revenue multiples hit lowest level in 2024 despite rising prices
Aave is currently experiencing a fundamental reset of its valuation: while the token’s price remains above its 2024 lows, the FDV to annual revenue ratio has collapsed at these levels (<20x), indicating that the protocol is generating significantly more revenue relative to its market cap than during the speculative peaks of 2025. Will Win" and the high-profile exit of lead developer BGD Labs.
Listen. Read. Watch. Get involved.
Looking for more? Get the latest crypto news at PK Press Club.com and explore our robust data and index offerings by visiting PK Press Club.com/institutions.
Note: The opinions expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc., CoinDesk Indices or its owners and affiliates.
