Welcome to our institutional newsletter, Crypto Long & Short. This week:
- Martin Gaspar talks about how Bitcoin seeks to overcome quantum fears, echoing the climate reaction of the past
- Top headlines that institutions should pay attention to by Francisco Rodrigues
- Aave Revenue Multiples Hit 2024 Lows Despite Higher Prices on Week’s Chart
Thanks for joining us!
-Alexandra Levis
Expert Perspectives
Why Bitcoin Quantum Fears Will Pass Just Like Climate Panic
By Martin Gaspar, Senior Crypto Market Strategist, FalconX
Quantum technology has become a major topic for cryptocurrencies in recent months, partly due to technological advances in that space, but also because investors look for possible culprits for the stagnation of cryptocurrency prices after October. Quantum risk may seem like an existential threat to bitcoin given the potential for bad actors to crack legacy accounts like Satoshi’s. However, a clearer understanding of the threat and greater industry focus on solutions are leading towards a positive resolution.
There are striking parallels to concerns about the energy use and climate impact of Bitcoin proof-of-work (PoW) mining that dominated the headlines in 2021. They also felt existential, as the headline risk made BTC socially unacceptable. Although industry experts knew that climate concerns were misguided (compared to other industries, such as tech data centers, BTC’s energy footprint is low), the fears were perpetuated and culminated in Tesla abandoning BTC as a payment option due to climate risk. At the time, Elon Musk’s support for BTC was a big sentiment driver, so this action surprised the market. If forward-thinking Elon thought the issue was significant enough to withdraw its support for BTC, more conservative groups could try to ban it or stifle BTC adoption. From an investor’s point of view, why would you buy an asset with such risk? This question resonates today and is especially pertinent now as lower cryptocurrency prices weigh on sentiment.
The good news is that the industry can overcome this. In 2021, industry leader Strategy took the initiative to work with BTC miners to publish statistics on the renewable energy mix of their energy consumption. While it was no secret to the crypto community that BTC miners naturally look for the lowest cost of energy, which is often renewable energy, collecting hard data helped convince the naysayers. The industry was able to regain credibility to help allay concerns.
We’re seeing the same thing as industry stalwarts band together to release data on quantum risk. Coinbase recently created a working group on quantum computing and blockchain, which will help issue recommendations for industry participants to protect against quantum risks and provide analysis on quantum advancements. Additionally, on February 5, when BTC was selling sharply towards $60,000, Strategy announced a quantum security program during its earnings call, which may have helped curb further selling. It aims to coordinate with the “global bitcoin, crypto and cybersecurity community” to assist with Bitcoin’s quantum transition.
At the same time, several startups are working on developing post-quantum technology 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 near-term concerns.
BTC is set to turn the page thanks to its proactive efforts to dispel quantum hysteria. Once the industry presents clear facts and a plausible plan, this problem will become a reality, just like the PoW climate problem of years past.
Headlines of the week
francisco rodrigues
Geopolitical risks have shown again this week that liquidity in the cryptocurrency space means investors are heading to the exits as soon as they can. The renewed conflict in the Middle East has caused significant capital outflows from Iran, while investors in the United States have also retreated. Still, the builders seem not to be out of date.
Chart of the week
Aave Revenue Multiples Hit 2024 Lows Despite Higher Prices
Aave is currently undergoing a fundamental valuation reset: while the token’s price remains higher than its 2024 lows, the FDV/annual revenue ratio has plummeted to those levels (<20x), indicating that the protocol is generating significantly more revenue relative to its market cap than during the speculative peaks of 2025. This decoupling suggests that the market is heavily discounting Aave's current earnings power, probably assessing the risk of execution after the narrow approval of March 1. "Aave Will Win" proposal and the high-profile departure of lead developer BGD Labs.
Hear. Read. Look. Engage.
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Note: The opinions expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc., CoinDesk Indices or their owners and affiliates.
