An ongoing $130 million hack of the Coldcard hardware wallet has left the device's reputation for security in question, even though Bitcoin's own blockchain remains untouched. Meanwhile, Bitcoin spot ETFs pulled in $382 million of combined inflows on Aug. 3 and Aug. 4, with most of the money going to the two largest funds.
Coinkite, the maker of the Coldcard hardware wallet, is dealing with an ongoing hack that has drained $130 million worth of customers' Bitcoin. The device was widely regarded as a gold standard for storing private keys offline, but that reputation is now in doubt. Bitcoin's price, meanwhile, has fallen about 1% since the start of August, as of Aug. 5, a move that hasn't accelerated even as news of the hack spread.
A flaw in the seed phrase, not the blockchain
Affected Coldcard users believed their recovery seed phrases were generated with a true random number generator, making it almost impossible to derive their private keys. For certain wallets, that wasn't the case. Users who lost Bitcoin found that their recovery seed phrases weren't as random as they thought, which made it easier for hackers to exploit the flaw and steal funds.
The underlying Bitcoin blockchain itself wasn't hacked and continues to operate as it always has. Bitcoin's price hasn't tanked since news of the hack broke, which suggests the market understands the flaw sits with Coinkite's wallet, not the network.
Money keeps moving toward the big ETFs
The incident adds weight to an argument in favor of institutional custody over self-managed cold storage. Bitcoin spot ETFs registered $382 million of combined inflows on Aug. 3 and Aug. 4, with 74% of that money going to the iShares Bitcoin Trust and 14% to the Fidelity Wise Origin Bitcoin Fund. Both funds carry the same 0.25% expense ratio.
Not every Bitcoin holder has the technical background to properly manage self-custody, and the Coldcard hack underscores that gap. As a result, large financial institutions offering Bitcoin ETF exposure stand to keep drawing interest from investors who would rather outsource the job of holding their coins.
Source: Motley Fool
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