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- More than 1,082 BTC worth about $70 million was stolen through an old Coldcard firmware vulnerability.
- Long-term Bitcoin holders continue reducing liquid supply as speculative activity declines.
- Analysts say stronger demand is still needed before Bitcoin can confirm a sustained market recovery.
Bitcoin is confronting two major developments at once. A newly disclosed firmware vulnerability affecting older Coldcard hardware wallets has led to the theft of more than 1,082 BTC, valued at roughly $70 million, while fresh on-chain data suggests the cryptocurrency market is entering a phase that resembles previous bear market bottoms.
Although the two events are unrelated, they paint a broader picture of Bitcoin’s current landscape—where security risks remain real even as long-term investors continue strengthening the network’s supply dynamics.
Coldcard Firmware Bug Leads to Massive Bitcoin Theft
Researchers revealed that attackers emptied 1,196 Bitcoin wallets in less than an hour after exploiting a weakness in older Coldcard hardware wallet firmware. Instead of compromising the devices directly, the attacker is believed to have reconstructed wallet private keys offline by taking advantage of a flaw in the way vulnerable devices generated recovery seed phrases.
The issue affected Coldcard Mk3 devices running firmware versions released between 2021 and early 2023. A coding mistake disabled the hardware random number generator, forcing affected wallets to rely on predictable software-generated randomness.
That dramatically reduced the strength of wallet seed phrases, making large-scale brute-force attacks practical using modern computing resources.
Blockchain researchers observed that every withdrawal followed nearly identical patterns, using the same transaction fee and leaving no change outputs—strong evidence that the attacker already controlled the private keys before initiating the transfers.
Users Urged to Upgrade Immediately
Following the disclosure, Coldcard manufacturer Coinkite advised anyone who generated wallet recovery phrases on affected firmware versions to immediately transfer funds into newly created wallets generated with the latest firmware.
The company noted that users who enabled a BIP-39 passphrase receive an additional layer of protection because attackers would still need the separate passphrase even if the recovery seed had been compromised.
Researchers also warned that more vulnerable wallets may still exist, suggesting the attacker could have precomputed millions of potential wallet keys and is waiting for matching addresses to receive Bitcoin.
Bitcoin Supply Is Moving Into Strong Hands
While the security incident rattled wallet owners, Bitcoin’s blockchain data is showing a different long-term trend.
According to on-chain analysts, the percentage of Bitcoin held by short-term holders has fallen to multi-year lows. Much of the supply previously held by newer investors has naturally matured into long-term holdings instead of being sold.
At the same time, long-term holders now control an increasingly large share of Bitcoin’s realized capitalization, reducing the amount of BTC actively available for trading.
This tightening supply mirrors conditions seen near previous bear market lows.
Despite improving supply fundamentals, analysts caution that Bitcoin has not yet entered a confirmed recovery.
Recent declines in short-term holder activity largely reflect fading speculation rather than a wave of new buyers entering the market. Trading volumes and fresh capital inflows remain relatively subdued compared to previous bull market recoveries.
Some analysts also note that short-term investors continue realizing substantial losses, a pattern commonly seen during the final stages of major market corrections.
The combination of shrinking liquid supply and resilient long-term holders creates conditions that could support a powerful rally if demand returns.
However, analysts stress that tighter supply alone is insufficient. A sustainable recovery would likely require renewed buying interest, rising trading activity, and increasing participation from newer investors.
Also Read: Tokenized RWA Futures Nearly Overtake Bitcoin Trading—$61.7B Volume Shocks Markets
Meanwhile, the Coldcard incident serves as a reminder that self-custody remains one of Bitcoin’s greatest strengths—but only when wallets are kept updated and secured with modern protections.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
I’m your translator between the financial Old World and the new frontier of crypto. After a career demystifying economics and markets, I enjoy elucidating crypto – from investment risks to earth-shaking potential. Let’s explore!
