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The largest cryptocurrency by market value slipped to $62,598 on Sunday, down 1.33% over 24 hours, as a widening hardware wallet exploit offset macroeconomic tailwinds that might otherwise have supported prices.
Three Waves of Exploits
Galaxy Research identified a third wave of coordinated sweeps tied to weak Coldcard-generated keys, bringing the total observed losses to approximately $89 million across more than 4,500 addresses. The attacker has shifted focus from large balances to smaller holdings, changing how funds are collected on-chain to evade detection.
The exploit stems from a firmware bug dating back to 2021 that weakened the randomness of seed phrase generation across five Coldcard hardware wallet models. Coinkite, the company behind Coldcard, has urged all customers to generate new recovery phrases and migrate funds immediately.
A Reversal of the FTX Pattern
What makes this incident particularly notable is how users are responding. Following the collapse of FTX in late 2022, investors pulled bitcoin off exchanges in record numbers, trusting self-custody over centralized platforms. The Coldcard exploit has produced the opposite effect: smaller bitcoin holders are now moving funds back onto exchanges for safety.
Blockchain analytics firms report that small BTC transfers to exchanges have surged to levels not seen since the FTX era, a stark reversal driven by the realization that hardware wallets, long considered the gold standard of self-custody, can also harbor critical vulnerabilities. For more on the earlier stages of this exploit, see our coverage of the initial $70 million Coldcard damage assessment.
Macro Tailwinds Fail to Lift Sentiment
The market sell-off came despite potentially supportive macroeconomic developments. Oil prices and Treasury yields fell after fresh United States-Iran negotiations eased inflation concerns, a combination that has historically benefited risk assets. Bitcoin and ether, however, both failed to catch a bid.
Ether traded at $1,844, down 1.60%, while XRP and Solana posted similar declines. The broad-based CD20 index fell 1.35%, suggesting that the Coldcard saga is weighing on overall crypto sentiment beyond just bitcoin holders.
What Comes Next
The expanding scope of the attack raises uncomfortable questions for the self-custody sector. If a five-year-old firmware bug can silently compromise thousands of hardware wallets, the trust model that underpins cold storage needs scrutiny. Exchange security, once the industry's weakest link, is suddenly looking like the safer option for spooked retail holders.
For ongoing coverage of security developments and market analysis, visit Bitnxt.
