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Coldcard exploit prompts bitcoin holders to deposit more on exchanges

Daily exchange deposits of under 10 BTC spiked to 7.3K BTC, the highest level since Feb. 6, after the July 30 Coldcard incident.

Reported · Written up by our desk · Market Structure

CoinDesk reports that a Coldcard hardware-wallet exploit has led some smaller bitcoin holders to move coins onto centralized exchanges, reversing the large withdrawal pattern seen after the FTX collapse in late 2022. Blockchain analytics firms cited an on-chain flow suggesting investors are prioritizing exchange custody as questions about self-custody security resurface.

According to CoinDesk, CryptoQuant data shows daily exchange deposits of Bitcoin transfers under 10 BTC surged to 7.3K BTC on Friday, the highest since Feb. 6. The outlet links the jump to the ongoing multi-million-dollar Coldcard incident that began Friday, July 30, and has continued in waves.

CoinDesk says the Coldcard problem stems from a firmware bug that weakened how some devices generate seed phrases, reducing randomness during wallet creation. The flaw reportedly forces some units to fall back on a predictable software random number generator instead of the device’s hardware RNG, enabling attackers to reconstruct likely seed phrases offline and derive private keys without physical access.

CoinDesk also notes that losses have been estimated at 1,000 to 1,300 BTC, roughly $70 million to $90 million, across more than 1,000 addresses, with bursts moving hundreds of BTC in under an hour. On-chain analysts say the attacks may still be ongoing as of the time of reporting.

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