A software flaw in a Bitcoin wallet that was considered extremely secure has left thousands of investors counting losses. More than 1,755 Bitcoin, worth around $110 million, were stolen from wallets using Canada-based Coinkite’s Coldcard devices, raising fresh concerns about how safe crypto wallets really are.
“The moment it loaded I knew I was screwed because I saw red lines for withdrawals,” Jonathan Goodman, one of the victims, told Bloomberg News. “Between 9:36 and 9:43 p.m. on July 29th, all three of my wallets were completely drained.”
Goodman says he lost $1.6 million due to the attack.
The incident has raised fresh questions about the safety of crypto wallets. Zakhil Suresh, CEO of BitSave asserts, “The people affected by the Coldcard flaw did nothing wrong, and that is exactly the point. We do not think an ordinary investor should have to become a security expert to hold Bitcoin safely.”
Here’s a look at how safe crypto wallets are and the best way to store Bitcoin
Why do people worry about the safety factor when investing in Bitcoin?
Every Bitcoin lives on the blockchain, a public digital record that tracks every transaction. Whoever holds the private key, a long secret string of up to 24 randomly arranged words that authorises any movement of the coin, has total control over the Bitcoin. This is exactly why, despite the system’s total transparency, Bitcoin storage faced scrutiny.
Where and how to store Bitcoin is especially important:
Investors have three options:
Leave their Bitcoin on a crypto exchange: This is extremely convenient, as the exchange manages the private keys. But if the platform is hacked or fails, investors may have limited control over their holdings.
Hold it themselves through a hardware wallet: The self-custody gives investors direct control over their Bitcoin, but it comes with responsibility. The recovery phrase must be properly protected, as losing it means permanently losing access to the Bitcoin. The Coldcard incident reflects how such a system can come at a great risk.
Use an institutional custodian: This is how US spot Bitcoin ETFs and investment platforms, such as BitSave, hold client assets. A specialist firm, built for this single job and audited for it, safeguards the keys, which are geographically split and are under institutional controls.
“Our investors continue their monthly investments without ever touching a key or a device, because 100% of their assets sit in insured institutional custody with keys split across geographies. The single point of failure that failed those holders simply does not exist in this model,” Suresh says
So, in a way, no storage method is completely risk-free. Self-custody offers greater control but requires greater responsibility, while institutional custody involves trusting a third party. For long-term investors, deciding how to store Bitcoin is therefore as important as deciding whether to invest in it.