$89M Coldcard Outflow Fuels Debate Over Bitcoin Self-Custody

A recent outflow of about $89 million from Coldcard's hardware wallet platform has raised concerns over the stability of Bitcoin's self-custody model.

The incident, which occurred on August 2, was caused by a firmware flaw in the wallet made by Canadian firm Coinkite Inc. that allowed attackers to calculate keys offline and automate withdrawals.

Bloomberg senior ETF analyst Eric Balchunas pointed out that this highlights the advantages of regulated spot Bitcoin exchange-traded funds (ETFs). He noted that Coinkite has only about 5 employees, which he believes is too small for a company entrusted with something so important.

According to Balchunas, using bigger operators like Coinbase or Ledger is more reasonable for protecting large sums, even if fees are higher. He also presented spot Bitcoin ETFs as an alternative, citing their institutional custody system under regulation, which reduces the need for investors to directly shoulder risks of technical failure.