Coldcard's security breach prompts cautious moves by bitcoin holders, reversing trends from the FTX incident.
By Omkar Godbole Aug 2, 2026, 12:03 p.m. 3 min readMake preferred on ShareShare this articleCopy linkX (Twitter)LinkedInFacebookEmailMake preferred on Increased bitcoin transfers to exchanges following the hack. (CryptoQuant)SummaryShow- The Coldcard hack has ignited concerns regarding the security of hardware wallets.
- Bitcoin holders are increasingly transferring their coins to exchanges.
- This trend stands in stark opposition to the withdrawals observed after the FTX collapse.
Security incidents in the cryptocurrency sector often lead to predictable reactions among investors. In the wake of the FTX exchange's collapse in November 2022, many rushed to withdraw their assets from centralized exchanges and opted for self-custody solutions such as hardware wallets.
Currently, however, there is a noticeable shift as investors are transferring their bitcoin to exchanges. This follows the recent Coldcard hardware wallet incident, which started on July 30 and has raised significant concerns about the safety of self-custody.
"Daily exchange deposits of Bitcoin transfers under 10 BTC surged to 7.3K BTC yesterday [Friday], marking the highest level since February 6, likely due to the Coldcard incident as users seek safety," said Julio Moreno, the head of research at blockchain analytics firm CryptoQuant.
Details of the Coldcard Incident
Coldcard, a hardware wallet designed solely for Bitcoin by the Canadian company Coinkite, is currently undergoing a major security breach due to a firmware issue that has compromised the seed phrase generation for some devices.
The thefts, which began on July 30, have continued in waves, with analysts estimating losses between 1,000 and 1,300 BTC (approximately $70 to $90 million) across over 1,000 wallets. The most significant thefts involved hundreds of BTC being moved in less than an hour, and ongoing attacks are suspected.
The attackers exploited a vulnerability that dates back to March 2021, which caused certain Coldcard devices to revert to a predictable software random number generator when creating new wallets instead of using the hardware random number generator. This flaw reduced the randomness of the seed, allowing attackers to reconstruct likely seed phrases offline and derive private keys without accessing the physical device.
This situation has led many, including Binance Founder CZ, to reconsider the safety of hardware wallets and the concept of self-custody.
Market Reactions: Increased Transfers to Exchanges
Data from CryptoQuant indicates a significant uptick in the movement of coins to exchanges, reversing the trend witnessed after the FTX collapse.
On July 31, daily bitcoin deposits to exchanges for transactions under 10 BTC rose to 7,300 BTC, the highest since February 6.
The number of daily active addresses surged from 645,000 on July 30 to nearly one million on July 31, marking the highest level since December 10, 2024, largely driven by accounts sending coins to exchanges.
"It appears that users have become extremely cautious and are moving their Bitcoin after the Coldcard incident," Moreno stated.
Small bitcoin transactions reflect a similar trend. CryptoQuant reported that the total volume of transfers less than 1 BTC hit 39,600 BTC on Friday, nearing the 39,900 BTC transferred on November 16, 2022, the day after FTX declared bankruptcy.
"This is the largest movement of BTC from smaller holders in a single day since the FTX collapse," Moreno noted, expressing approval of the proactive measures being taken by users.
Blockchain analyst Timechainindex echoed this observation, reporting total net inflows to exchanges of 11,163 BTC on July 31, predominantly directed toward major platforms like Binance, River, Kraken, and OKX.
"These are users who are scared," the analyst remarked, describing the nature of the BTC influx.
Following the Coldcard exploit, the total amount of BTC held in wallets linked to centralized exchanges has risen from 2.703 million to 2.715 million BTC.
Contrast with FTX Fallout
After the FTX debacle, the primary concern was the solvency of exchanges and potential withdrawal freezes. In response, holders moved bitcoin into self-custody, decreasing the balances on exchanges.
The current scenario revolves around risks associated with a specific hardware wallet, prompting some holders to temporarily transfer smaller amounts to exchanges.
This incident is limited to Coldcard and does not indicate a widespread failure of self-custody, as most hardware wallets and correctly generated seeds remain unaffected.