Short-term impact of the Coldcard incident on Self-Custody

[PrivacyG]

Who ever thought their best solution is to move from Coldcard to a Centralized Exchange has a pretty large chance of waking up to a really empty balance.

Anyway.

I do not believe this will destroy the idea of hardware wallets, or the idea of self custody.  It is a very big opportunity for a newer brand to advertise it self, or for a larger brand such as Trezor to advertise a new product.  And I believe this will actually make some of the brands stick out better and more than ever before with their new products.  It could be as simple as including dice in the package and instructing the customer to create their own Seed completely offline and manually.  Instruct them to create a Passphrase or find a way to make easy Multi Sig setups and you already have a reason to advertise that product as the 'strongest'.

Self custody will not die.  It will progress and people will actually make their Cryptocurrency wallets a lot safer.  The rest of them who move to Centralized Exchanges or ETFs, they either lost a lot of money to the Coldcard attacker and they are too afraid to have money in their own responsibility any more or they were never really too excited about self custody in the first place.

This is going to provoke a competition for who can find the best way to profit off of this.

[Churchillvv]

Any proof that people moved to CEX after the incident or people turned to ETFs for safety? I don’t see any proof of that but however if people would love to move I don blame anyone this is a paradigm shift, it has never occurred and this it’s very first time and it’s a big concern how vulnerability has existed without people’s knowledge until it got done on people’s wealth.

Now cold wallet, air gapped wallet not hardware anymore will be the safest place for self custody but not everyone likes self custody especially when it’s hard like airgapped self custody offline, some might consider the idea of not being responsible for their loss.

[shinratensei_]

What's the deal with people moving to CEX after the coldcard incident? Do they even remember the main reason they bought their hardware wallet in the first place which is to keep their money from being frozen unfairly by the exchange? buying ETF still make sense because your money is protected by SIPC up to $500,000 but keeping your money in CEX offers none of that and if the CEX is going down, you will go down too because you are unsecured creditors.

[Rikafip]

What's the deal with people moving to CEX after the coldcard incident?

I honestly haven't heard anything about it anywhere, but even if there was, It might be pushed by centralized exchanges, using this incident to make people give up on self custody.

Hell, I still remember CZ saying that 99% of the people would be better off if they keep their crypto on centralized exchanges rather than in their own non custodial wallets.

[Taskford]

What's the deal with people moving to CEX after the coldcard incident?

I honestly haven't heard anything about it anywhere, but even if there was, It might be pushed by centralized exchanges, using this incident to make people give up on self custody.

Hell, I still remember CZ saying that 99% of the people would be better off if they keep their crypto on centralized exchanges rather than in their own non custodial wallets.

For sure it won't happen and I don't see any trend about people transferring from self custody to exchange, because this is provably much riskier action to do.

But look at this, ETF got momentum and they are the one benefiting on current situation happened on Coldcard After a $130 Million Hack of Coldcard, Money Is Flowing Into Bitcoin ETFs. Here's the Best Bitcoin ETF to Buy Right Now.

It seems that lots of people buy those opinions that its good to transfer their funds on ETF that's why it happens. But I'm sure once this issue cools down those people will came back on self custody and realize that they are more expose on much bigger risk for transferring their asset on those financial products.

[moneystery]

These people simply haven't realized that storing their assets on a centralized platform is just more risky for them. We've already seen how many major exchanges have shut down and how many users have left scrambling to cash out their assets. Are they ignoring that fact?
If they claim that the Coldcard incident means storing your assets in a hardware wallet is simply not recommended, that's ridiculous, because this is a Coldcard vulnerability and cannot be generalized to other hardware wallets.
Also, users can still take preventive measures on their hardware wallets, such as using passphrases and multisig wallets. So, literally, they can still store their assets very securely on a hardware wallet, far more securely than if they kept them on an exchange.

[Churchillvv]

Hell, I still remember CZ saying that 99% of the people would be better off if they keep their crypto on centralized exchanges rather than in their own non custodial wallets.

Of course he is not wrong because from what I observe, the masses I mean the majority of people who are not really crypto enthusiasts are always bent on the idea of not taking the blame, and only the 1% of the people which a good number of the people in the forum might belong to, likes self custody. People just want to push blames to someone to get compensation when things get bad so their best option is to go to CEX or firms to out their bitcoin and take papers home.

[stadus]

For us who were not affected, the impact would only be temporary. But for those who's hundreds or thousands of bitcoin lost, it might hunt them forever. They will start to doubt self-custody with hardware wallets from now on, if that really works or its just a trap for them.

But even with this current issue, I still won't suggest to shift into centralized exchanges and let them manage our bitcoin. That's even more risky for us because we are not the sole owners of our bitcoin now, the exchanges have deeper access compared to us. And when incident like Coldcard happens again, we the owners are the most to be blamed, not the exchange because they don't force us in the very beginning.

[OgNasty]

I think the short term and long term impact of the coldcard incident is that people won’t be holding their own coins anymore. They will most likely choose to buy bitcoin in the form of ETFs going forward and I can’t say I blame them. I never liked the idea of hardware wallets and I’m waiting for the day something similar happens on Bitcoin L2s.

[shinratensei_]

What's the deal with people moving to CEX after the coldcard incident?

I honestly haven't heard anything about it anywhere, but even if there was, It might be pushed by centralized exchanges, using this incident to make people give up on self custody.

Hell, I still remember CZ saying that 99% of the people would be better off if they keep their crypto on centralized exchanges rather than in their own non custodial wallets.

The people who got their account frozen indefinitely would beg to differ, unfortunately CZ has always been such a fudder, if the coins frozen by the exchange were taken into account and considered as lost, the amount of bitcoin lost from the CEX would sky rocket. If people spend enough time to read their term and conditions they would know that CEX is a losing game when things go wrong.

The problem with CEX isn't custody, it's the management that rarely being transparent with its customers and could go down literally any time, you can never trust anyone but yourself when it comes to money. Nobody seen bitmart bankruptcy coming having operated for more than 8+ years but it did come.

[mirakal]

This is only temporary in my view, because the current situation is still hot about the issue of Coldcard which continues to be discussed therefore many people are hesitant to choose About Self-Custody.
Trust me they will go back to the hardware again, continue the matter they want to keep on the exchange or transferred to ETF it becomes their decision, you don't worry too much because I myself still believe in hardware rather than third parties.

This issue might remain a hot topic for maybe a month and after that, people will slowly move on from the said incident and would trust a hardware wallet again. Except for those who have lost a significant amount of bitcoin, there might be a mass migration probably and start trusting centralized exchanges again as they will really think it will be safer that way, or just shift into buying Spot Bitcoin ETFs as it is reported that there was a big capital entry with US Bitcoin ETFs a week after the hack.

However, these changes can only be temporary, people will still end up trusting self-custody over their bitcoin. Smart investors do not just easily shift their decisions, they know exactly how risky it is to entrust their hard-earned bitcoin to other group or entity.

[arwin100]

This is only temporary in my view, because the current situation is still hot about the issue of Coldcard which continues to be discussed therefore many people are hesitant to choose About Self-Custody.
Trust me they will go back to the hardware again, continue the matter they want to keep on the exchange or transferred to ETF it becomes their decision, you don't worry too much because I myself still believe in hardware rather than third parties.

This issue might remain a hot topic for maybe a month and after that, people will slowly move on from the said incident and would trust a hardware wallet again. Except for those who have lost a significant amount of bitcoin, there might be a mass migration probably and start trusting centralized exchanges again as they will really think it will be safer that way, or just shift into buying Spot Bitcoin ETFs as it is reported that there was a big capital entry with US Bitcoin ETFs a week after the hack.

However, these changes can only be temporary, people will still end up trusting self-custody over their bitcoin. Smart investors do not just easily shift their decisions, they know exactly how risky it is to entrust their hard-earned bitcoin to other group or entity.

Lots of mix reactions happened after the hack and some people decide to transfer from ETF because of that bad incident happened to them.

But as always history always proves that the effects of those hacking incident will only exist for short time, then those people would realize later on that they should not supposed to trust those third party platform since it adds more risk from them.

Self custody still the best despite of what happen, since its still good for investor that they have control on their coins.

[Tamaperdana]

Now that the Coldcard incident has caused millions in BTC losses, I am beginning to wonder how would this affect the self-custodial industry? I mean, will the impact be such that people will avoid hardware wallets forever? After what happened with Coldcard, many decided it was safer to move to a CEX instead. Others went ahead and bought Bitcoin ETFs. This is bad because it gives centralized entities more leverage over Bitcoin.

My question is, will the impact be short-lived or a long-lasting one? What would it take for people to trust doing self-custody of their BTC again (via HWs)?

Your input would be greatly appreciated. Thank you.

I'm not sure what will happen after this, but what's clear is that people will definitely be a little traumatized by this recent incident. So, given the current situation, I think people might need more time to regain confidence in hardware for storing their Bitcoin. Furthermore,, I personally don't do that right now.

For the long term,, I'm writing down my Bitcoin wallet phrase, making sure it's correct, and then storing it in a safe place. After that, I deleted all the wallets on my phone. I think that's much safer, as my Bitcoin is currently untouched by the internet. So, I think this is better, because honestly, I'm also worried after this incident. So,, I think isolating my Bitcoin from the internet is the right decision. So, what do you think about my actions?

[Agbamoni]

There is no doubt that this has caused a lot of people to even think twice about Bitcoin in general, and some have changed their mindsets on means of keeping their Bitcoin, but moving them to a CEX is not the better option because security issues with CEX are almost certain all the time. There is a case of Bitmart shutting down without properly notifying its users of the suspension time for deposits, and now they have even restricted withdrawals, and so many people have their coins worth hundreds and thousands of dollars stuck in that exchange and same goes with the FTX fall that affected lots of customers. 

The Coldcard incident is not enough reason for people to start thinking twice about choosing Bitcoin. It is not the first time Bitcoin is lost from either a CEX, ETF, or a non-custodian wallet.

I understand many will interpret the wrong message from this news. The message is to take security seriously. Both wallet security and personal security. The attack on Bitcoin from scammers is high in this era. Dont joke with what you have. Protect it at all costs. That is the message.

[Agbe]

My question is, will the impact be short-lived or a long-lasting one? What would it take for people to trust doing self-custody of their BTC again (via HWs)?

Your input would be greatly appreciated. Thank you.

From what I had read from some of the users of the ColdCard hardware wallet, they are doubting the future of bitcoin and they said they are not coming back again again to bitcoin. One of them lost bitcoins that he was keeping it for his old age and for his children and this is happened to him and he is very sad. One of them lost 2 BTC. But looking at the whole scenereo, it was a wallet that was attacked and not the bitcoin Blockchain so there is nothing to worry about bitcoin. Things are still going well and the only this that ColdCard has lost it reputation.

And the issue do not extend to other Wallets but as human mind there is that fear.

[SeriouslyGiveaway]

From what I had read from some of the users of the ColdCard hardware wallet, they are doubting the future of bitcoin and they said they are not coming back again again to bitcoin. One of them lost bitcoins that he was keeping it for his old age and for his children and this is happened to him and he is very sad. One of them lost 2 BTC. But looking at the whole scenereo, it was a wallet that was attacked and not the bitcoin Blockchain so there is nothing to worry about bitcoin. Things are still going well and the only this that ColdCard has lost it reputation.

They got confused between Bitcoin and Bitcoin wallets. Bitcoin is strong and secure but Bitcoin wallets have strong and weak ones. It's true with Bitcoin hot wallets and Bitcoin cold wallets as hardware wallets are different with each other too. It's not right to think all hardware wallets are the same in security and quality.

What happened with Coldcard wallet is very unprecedented and terrible for people who lost their bitcoins but leaving forever or coming back, it's their individual decision while Bitcoin is not responsible for such.

Coldcard case actually rang a strong alarm on security of Bitcoin wallets and people must be more carefully when checking reviews about wallets, and choose wallets to use. Lastly using a wallet passphrase since Coldcard hack is like mandatory.
https://learnmeabitcoin.com/beginners/security/#passphrase