Today I'd like to touch on a systemic threat to the bullish thesis on Bitcoin, and Crypto in general, which I don't see discussed very often, which is Quantum Computing (QC). Now, one of the most popular demonstrations of the power of QC, has been it's application of processing power to crack lengthy mathematical codes. Many companies, and governments across the globe, are investing in QC at the moment, including China, who recently boasted that their QC is 10 Billion times faster than Google's, shortly after Google clained Quantum supremacy. WTF? According to Deloitte, QC poses an extremely grave threat to the crypto space, and calls for a potential viable alternative to traditional cryptography, which could help mitigate the threat to the roughly 25% of Bitcoin apparently at immediate risk of hack.
There's an important point that needs to be made before we take a look at, and analyze Bitcoin's recent price action, and that's on the subject of asymmetric cryptography (AC). I know many of you are dying to talk about this, and are thinking that the so-called one-way function of AC protects the private key, because of the duration of time needed to compute it (from the public key) with even today's fastest computers. However, it's proven that any key, of seemingly any length, can be hacked with a Quantum Algorithm (QA) - see Peter Shor's (MIT mathematician) work on quantum algorithms. We've seen evidence of bitcoin being hacked in the news lately, and due to the sheer (unfathomable) power of QC's - it wouldn't take long, if not seconds, to hack.
I am certainly no expert in the crypto space. But, imo the very existence of QC technology, renders traditional cryptography marginally useful (for now), as long as QC remains outside of mainstream channels, but essentially moot in the medium to long-term. If QC ever went mainstream, or it got into the wrong hands, let's say, Bitcoin, along with all crypto currency's, could go to zero. Of course, this is all hyperbole, so I appreciate you guys letting me indulge today. Let's discuss further?
Onto some technical analysis:
Simply looking at the parabolic nature of Bitcoin's short-term hype cycles, we can can deduce a bearish thesis on immediate overbought or oversold levels. When you look at the weekly time-frame, for example, you can see that the RSI is approaching 80, once again, just as we saw in the June 2019 top, and also in the Dec 2017 top, when we saw an RSI of 90 (we're now seeing the highest weekly RSI since Dec 2017). Today we're not seeing overbought levels, we're seeing extremely overbought levels, which suggests we could see a notable retracement back to at least the previous hype cycle high around 13,700 (at the 21 week EMA), and possibly lower. We all know markets are not functioning properly, and with the MMT nightmare we're seeing playing out across the globe everyday, hedges such as gold and crypto, may continue to rally as a seemingly appropriate store of value. Although a short-term retracement would be healthy before another potential leg higher, we have to consider the unique market scenario playing out, and the distortions in flows and price discovery. Personally, I missed out on the opportunity to buy Bitcoin very cheap about 10 years ago, so in the interest of full disclosre, I'd love to see Bitcoin back at 3,000. Don't let anything you've read today alter your convictions, or distort your own observations. Everything we post is intended to add value to the community, and to stimulate intelligent discussion.
Thanks for your time today guys! If you enjoyed our Bitcoin analysis, please hit the Like button and subscribe to our profile. The information and analysis shared in this post is not financial advice. Always conduct your own analysis and research. Cheers, Michael.
The QC conundrum is also very interesting. Saylor pointed out in an interview in response to this threat that BTC might not be the first target of a rogue QC system. They could hold the entire internet hostage. They could shut down email servers. They could launch nuclear missiles. I'm not sure why BTC would be their first or primary target. Food for thought.
Hedge_Of_The_World
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@cormacpara, I completely agree, thanks for sharing. My concern with crypto - and a cashless society in general - from day one was the power grid. As you said, they could shut down the entire internet, and the power grid would be one way to completely remove/disable a countries access to everything, including crypto/bank account funds. We need a hybrid alternative that, instead of a serial number, carries a QR code or something like that, along with a small amoount of gold or silver maybe. If the grid went down, what you're holding is still worth it's weight in gold (or silver). QC is a real game changer...
majicktrader
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Amazing - I don't trade crypto at present, but interesting to see the risks involved. And thanks for publishing. I guess it is the same idea that the USD would go to $0, but I think the money system would be reshaped before then. Imho it won't be to crypto, because it can't be controlled by the Central Banks.
Hedge_Of_The_World
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@majicktrader, Thank you, my friend! Well said. I think there needs to be a hybrid physical and digital currency for many reasons, and it needs to be protected by a newer version of post-quantum encryption.
CringeCrypto
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I AGREE WITH THE RSI AND DOUBLE TOP
Hedge_Of_The_World
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@mohmoa91, Thanks for the comment! It definitely looks like we're going lower to me from a technical perspective, but with all this insane hyperinflationary MMT behaviour by central banks and governments alike, who knows..
BlockTechEv
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Nice post, I enjoyed seeing someone discuss the threat of QC 👍
Wow. QC is something I've looked into along with Bitcoin, although much more time allocated to bitcoin but I never thought of putting the two together.
Crypto is the fiat hedge.
QC could be the Crypto hedge?
Either way great thought !!
Hedge_Of_The_World
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@Nathan_Anthony, Thank you, my friend! I appreciate the comment.