{"id":18238,"date":"2026-07-31T10:48:56","date_gmt":"2026-07-31T17:48:56","guid":{"rendered":"https:\/\/jasonsblog.ddns.net\/?p=18238"},"modified":"2026-07-31T10:48:56","modified_gmt":"2026-07-31T17:48:56","slug":"coldcards-38-million-so-far-exploit-shakes-faith-in-self-custody-may-push-investors-to-etfs-fud","status":"publish","type":"post","link":"https:\/\/jasonsblog.ddns.net\/index.php\/2026\/07\/31\/coldcards-38-million-so-far-exploit-shakes-faith-in-self-custody-may-push-investors-to-etfs-fud\/","title":{"rendered":"Coldcard&#8217;s $38 Million (So Far) Exploit Shakes Faith in Self-custody, May Push Investors to ETFs (FUD)"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">Uh-oh, emdashes, a favorite tell with AI generated content. The whole point of Bitcoin is self-custody and actually using Bitcoin as a means of exchange, with a monetary system that is deflationary and not inflationary. There will only ever be 21 million Bitcoin, as there is no money printing. There is mining where new Bitcoin is paid to miners for composing blocks and finding the difficulty nonce requiring power and hash investment, but that halves ever four years until about 2140 when transaction fees fully takeover when the network has fully matured. So ETF investment or BTC stocks gives you none of the advantages of Bitcoin as money: self sufficiency, privacy which can be improved greatly even though a public blockchain, borderless transacting&#8230; And there are several hardware wallet vendors, some with great track records, utilizing secure elements, with one firm actually attacking their own and others hardware wallets to improve security for the entire industry&#8230; And there are advanced ways of doing multi-signature wallets, complex passphrases&#8230; to improve self-custody security based on your threat model and holdings. But clearly the purpose of this report is to get you into custodial services where they can take your funds one day, And in financial collapses you can get wiped out if they don&#8217;t have 100% reserves&#8230; And just remember when the dollar was based on gold and the federal government made gold illegal and confiscated everyone&#8217;s gold to improve their own holdings. And that same federal government is moving to implement a Bitcoin Reserve&#8230;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><a href=\"https:\/\/www.coindesk.com\/business\/2026\/07\/31\/coldcard-s-usd38-million-so-far-exploit-shakes-faith-in-self-custody-may-push-investors-to-etfs\" target=\"_blank\" rel=\"noreferrer noopener\">https:\/\/www.coindesk.com\/business\/2026\/07\/31\/coldcard-s-usd38-million-so-far-exploit-shakes-faith-in-self-custody-may-push-investors-to-etfs<\/a><\/p>\n\n\n<div class=\"wp-block-ub-divider ub_divider ub-divider-orientation-horizontal\" id=\"ub_divider_0824622e-8b2c-4c64-89cf-ed7002f29a66\"><div class=\"ub_divider_wrapper\" style=\"position: relative; margin-bottom: 2px; width: 100%; height: 2px; \" data-divider-alignment=\"center\"><div class=\"ub_divider_line\" style=\"border-top: 2px solid #ccc; margin-top: 2px; \"><\/div><\/div><\/div>\n\n\n<h5 class=\"wp-block-heading\">A software bug in popular hardware wallet Coldcard that led to the theft to this point of nearly 600 bitcoin worth roughly $38 million is prompting questions about security and whether managing private keys has become too risky for everyday investors.<\/h5>\n\n\n\n<p class=\"wp-block-paragraph\">By Krisztian Sandor | Edited by Stephen Alpher<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/www.coindesk.com\/_next\/image?url=https%3A%2F%2Fcdn.sanity.io%2Fimages%2Fs3y3vcno%2Fproduction%2F17e2199d1d92db776ca604acd66f78a2a5052896-1754x804.png%3Fauto%3Dformat&amp;w=3840&amp;q=75\" alt=\"Coldcard flaw lets attacker drain $38 million in bitcoin from old wallets. (Coinkite)\"\/><figcaption class=\"wp-element-caption\">Coldcard exploit shakes faith in self custory (Coinkite)<\/figcaption><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Summary<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Coldcard firmware flaw led to the theft of at least $38 million in bitcoin, one of the biggest failures of Bitcoin self-custody to date.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Long among Bitcoin&#8217;s biggest selling points has been that investors don&#8217;t need to trust banks and exchanges to safeguard their money.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That promise suffered one of its biggest blows \u2014 maybe ever \u2014 after a flaw in popular hardware wallet maker Coinkite&#8217;s Coldcard allowed attackers to recreate wallet recovery phrases and steal bitcoin from what users believed were securely self-custodied wallets.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The flaw has since been patched but the fallout continues. Affected users must generate entirely new wallets and move their funds because updating the firmware alone doesn&#8217;t eliminate the risk.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>&#8216;Move your funds now&#8217;<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&#8220;If you generated a seed using a Coldcard wallet, move your funds now, using our updated best practices, before reading further,&#8221; wrote Coinkite CEO NVK <a href=\"https:\/\/x.com\/nvk\/status\/2083216713693151552\" target=\"_blank\" rel=\"noreferrer noopener\">in an open letter <\/a>a short time ago. He added that while the fix protects new seeds going forward, it does not fix seeds already generated on vulnerable firmware.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The exploit exposes a growing tension as bitcoin enters the financial mainstream: self-custody remains one of the cryptocurrency&#8217;s defining features, but the technical burden of securing private keys may increasingly push ordinary investors toward professional custodians, exchanges and regulated investment products instead.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Some prominent bitcoin advocates say the incident is among the most damaging failures of self-custody the industry has experienced.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&#8220;This is the worst hit in bitcoin history to the most knowledgeable and &#8216;properly secured&#8217; bitcoiners,&#8221; said Bitcoin commentator Guy Swann. &#8220;This isn&#8217;t an exchange getting hacked because of hot keys. This is thousands of individuals having their personal private keys recreated out from underneath them.&#8221;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Trading one risk for another<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For years, bitcoin advocates have argued that holding private keys removes the counterparty risk of centralized exchanges, a lesson reinforced by failures such as FTX. Analysts now argue that users have simply exchanged one set of risks for another.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&#8220;The self-custodial hardware space is a disaster at this point and creates more bad rep for the industry than anything else,&#8221; <a href=\"https:\/\/x.com\/LorenzoARK\/status\/2083228402660630848?s=20\" target=\"_blank\" rel=\"noreferrer noopener\">said<\/a> Lorenzo Valente, director of digital asset research at ARK Invest.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&#8220;In practice, consumers have traded counterparty risk for software risk, hardware risk, supply-chain risk, phishing risk, backup risk, and the possibility of losing everything through one mistake,&#8221; he said. &#8220;Frankly, you are better off today holding funds across several publicly-traded exchanges or ETFs.&#8221;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Coldcard flaw illustrates that challenge. Researchers found that certain firmware versions generated wallet seeds using far less randomness than intended, making them susceptible to brute-force attacks.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Even the recommended fix drew criticism.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&#8220;You just can&#8217;t ask people to roll dice to be secure with your self custody,&#8221; Casa CEO Nick Neuman said, referring to guidance that users supplement wallet-generated randomness with physical dice rolls. &#8220;It&#8217;s a non-starter for 99% of people.&#8221;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Security is not passive anymore<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The incident also highlights how rapidly cybersecurity threats are evolving as artificial intelligence lowers the cost of discovering software vulnerabilities.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&#8220;The idea of your bitcoin resting easy in some secret location while you enjoy life not worrying about it is currently unrealistic,&#8221; well-followed Taproot developer Udi Wertheimer wrote on X.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Instead of treating security as something users can set up once and forget, he argued, bitcoin holders increasingly need either to constantly monitor new threats themselves or rely on professional custodians with dedicated security teams.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&#8220;If you don&#8217;t want to worry yourself you need to pay someone else to be worried,&#8221; he said.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Coldcard exploit also fits a broader trend in crypto attacks. According to blockchain security firm Blockaid, most losses in the first half of 2026 came not from smart contract hacks but from compromised keys and operational security failures.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&#8220;Coldcard fits that pattern, with the exposure originating at the key generation stage,&#8221; said Ido Ben-Natan, Blockaid&#8217;s co-founder and CEO. He said the incident highlights how much users rely on security systems they never directly interact with.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&#8220;A hardware wallet&#8217;s security ultimately comes down to the firmware and systems users interact with but never see,&#8221; Ben-Natan said. &#8220;That means safeguards have to be built in upstream, before a user ever takes control of their assets.&#8221;Hardware wallet makers argue the incident highlights the importance of secure engineering rather than a flaw in self-custody itself.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&#8220;This incident is a good example of why open-source firmware should not automatically be equated with better security,&#8221; said Andrew Lazutkin, chief technology officer at Tangem. &#8220;Ultimately, security comes from strong architecture, thorough testing and independent verification.&#8221;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>A boost for institutional bitcoin<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The exploit could also strengthen the case for institutional custody at a time when spot bitcoin ETFs are attracting mainstream investors.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">David Lawrence, co-founder of Amicus, said incidents like Coldcard&#8217;s are likely to push new investors toward regulated products such as BlackRock&#8217;s iShares Bitcoin Trust (IBIT) rather than managing private keys themselves.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&#8220;This is also another win for &#8216;Big Bitcoin,'&#8221; Lawrence said, adding after incidents like this new investors looking to hold bitcoin may say that &#8220;I&#8217;m safer to just buy IBIT.'&#8221;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">He argued the incident could mark a turning point for one of Bitcoin&#8217;s oldest ideals.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&#8220;This is hugely damaging to the people who believe that 8 billion people will hold their Bitcoin in cold storage in the future,&#8221; Lawrence said. &#8220;That dream is over. Done.&#8221;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Uh-oh, emdashes, a favorite tell with AI generated content. The whole point of Bitcoin is self-custody and actually using Bitcoin as a means of exchange, with a monetary system that is deflationary and not inflationary. There will only ever be 21 million Bitcoin, as there is no money printing. There is mining where new Bitcoin [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6,7],"tags":[],"class_list":["post-18238","post","type-post","status-publish","format-standard","hentry","category-tech","category-world"],"blocksy_meta":[],"featured_image_src":null,"author_info":{"display_name":"Jason","author_link":"https:\/\/jasonsblog.ddns.net\/index.php\/author\/jturning\/"},"_links":{"self":[{"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/posts\/18238","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/comments?post=18238"}],"version-history":[{"count":1,"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/posts\/18238\/revisions"}],"predecessor-version":[{"id":18239,"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/posts\/18238\/revisions\/18239"}],"wp:attachment":[{"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/media?parent=18238"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/categories?post=18238"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/tags?post=18238"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}