Bitcoin Taproot Supply Drops 3% Amid Quantum Security Fears

According to on-chain analyst Willy Woo, Bitcoin’s Taproot address supply has fallen by approximately 3% since early 2024, creating a rift in crypto analytical circles about the underlying meaning of this movement. Woo argues that this decline might not signal panic selling but rather represents ‘housecleaning’ by early Bitcoin holders who are moving their BTC to more secure or custodial setups. ‘What constitutes an ‘OG dump’ is simply BTC moving out of an address untouched for seven years,’ Woo explained, emphasizing that on-chain data can misinterpret such activity as selling when it often reflects portfolio reorganization or collateral posting.

However, Charles Edwards of Capriole Investments presents a contrasting view, asserting that large-scale movements by early Bitcoin holders typically correlate with sell pressure. ‘We know this empirically,’ Edwards stated, pointing to on-chain charts showing hundreds of millions in old BTC moving in 2025. This fundamental disagreement highlights the complexity of interpreting blockchain data, where the same transaction patterns can indicate either strategic repositioning or market-exiting behavior.

Supporting Woo’s perspective, on-chain researcher Shanaka Anslem Perera noted that approximately 470,000 BTC, worth about $50 billion, has left dormancy this year. Crucially, Perera emphasized that much of this movement involved custody rotations and treasury placements rather than market sales. ‘The story is not capitulation,’ he wrote, ‘rather it’s custody evolution, collateralization, and an institutional catcher’s mitt.’ This suggests that institutional adoption and sophisticated treasury management may be driving the Taproot address decline rather than bearish sentiment.

The timing of these Taproot withdrawals coincides with growing unease over Bitcoin’s long-term resilience against quantum computing attacks. In July 2025, developers proposed ‘P2QRH,’ a quantum-resistant address type designed to protect up to 4 million vulnerable BTC—roughly 25% of the total supply—from future key exposure risks. This proposal represents a proactive approach to addressing what many consider the most significant long-term threat to Bitcoin’s cryptographic security.

The urgency around quantum security intensified after Project Eleven launched its Q-Day Prize challenge in April, offering 1 BTC to anyone who could crack Bitcoin’s cryptography using Shor’s algorithm before April 2026. This experiment, designed to test whether real quantum hardware can threaten Bitcoin’s elliptic curve encryption, has reignited debate about how soon the network might face genuine cryptographic stress. The challenge serves as both a stress test and a warning about the accelerating timeline for quantum computing capabilities.

Hardware manufacturers are responding to these concerns with tangible products. Trezor announced the Safe 7 wallet in October 2025, marking its first ‘quantum-ready’ self-custody device. This development signals that the cryptocurrency industry is taking quantum threats seriously and beginning to implement practical solutions for long-term security. The emergence of quantum-resistant hardware wallets represents a critical step in preparing the Bitcoin ecosystem for future technological challenges.

The movement of approximately 470,000 BTC worth $50 billion out of dormancy this year reflects a broader trend toward institutionalization and professional custody solutions. Rather than indicating mass selling, this activity appears to represent a maturation of Bitcoin’s custody infrastructure, with assets moving from individual wallets to institutional-grade storage and treasury management systems. This shift aligns with Bitcoin’s growing acceptance as a legitimate asset class requiring sophisticated security and management protocols.

The debate between Woo and Edwards highlights a fundamental challenge in cryptocurrency analysis: distinguishing between strategic portfolio management and market-exiting behavior. While Edwards points to historical correlations between large movements and price pressure, Woo and Perera suggest that the current environment represents a new paradigm where institutional adoption changes traditional on-chain interpretation metrics. The $50 billion in dormant BTC now entering managed custody arrangements suggests that Bitcoin is undergoing a structural transformation rather than facing capitulation.

As quantum computing concerns continue to influence security practices, the cryptocurrency industry appears to be entering a new phase of technological preparedness. The combination of proposed quantum-resistant address formats like P2QRH, hardware solutions like Trezor’s Safe 7, and the ongoing Q-Day Prize challenge demonstrates a coordinated effort to address future threats before they materialize. This proactive approach to security, coupled with the institutional custody evolution, suggests that Bitcoin’s ecosystem is maturing in response to both technological and market pressures.