Coldcard Collapse Paves Way for Regulated Bitcoin ETFs
A recent security failure affecting Coldcard hardware wallets has left users reeling after losing around $89 million. The technical cause of the incident was a firmware flaw in Coldcard wallets produced by Canadian company Coinkite Inc., which had existed since 2021.
Instead of generating private keys inside an isolated hardware chip, the devices used a predictable software algorithm, allowing hackers to calculate the keys offline and launch an automated withdrawal of funds. Bloomberg senior ETF analyst Eric Balchunas drew attention to the modest size of Coinkite's staff, around five people, which appears strikingly disproportionate to the amount of capital its products are expected to protect.
According to Balchunas, the infrastructure provided by giants such as Coinbase or Ledger appears far more logical for protecting large amounts of capital. He also points out that their high fees can be justified by the scale of their security controls. In contrast, exchange-traded funds (ETFs), where custody protection is provided by regulated institutional entities, may become the preferred option for long-term investors seeking only price exposure to Bitcoin.