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The coordinated hack of Coldcard wallets, which cost investors 1,800 BTC, is triggering an emergency migration of capital to Wall Street, with U.S. spot Bitcoin ETFs absorbing $620 million in net inflows in just a few days.
Bloomberg senior ETF analyst Eric Balchunas pointed to this direct connection, noting that funds such as IBIT and FBTC have been receiving fresh money every day since the incident, amounting to an "excellent cash inflow after a brutal summer."
The code that broke crypto's golden rule
Market panic erupted over details of a technical flaw in 2021 firmware released by Canadian company CoinKite. Because of a software bug, Coldcard devices ignored their built-in random number generator and created predictable seed phrases based on the devices' serial numbers.
This allowed hackers to mathematically calculate private keys and remotely drain thousands of addresses, with total losses already exceeding $116 million.
Remarkably, just a couple of weeks before the hack was discovered, the developers had reportedly reviewed the code using AI, but the artificial intelligence failed to detect the vulnerability.
This technological failure is sharply shifting the balance of power in favor of regulated funds. As Balchunas emphasized, investors are being forced to decide whom they trust if "some scumbag decides to mess around" with their Bitcoin: "a five-person boutique in Canada" — meaning CoinKite — or Larry Fink's BlackRock empire, with 25,000 employees and $15 trillion under management.
Against this backdrop, traditional finance "doesn't seem so lame anymore," the analyst said, while for basic long-term investing, it is becoming "hard to find a reason to use anything other than an ETF."
However, within the Bitcoin community itself, this shift is creating significant tension. Attempting to reassure those concerned about Wall Street control, Balchunas explained that exchange-traded funds are "not 'The Establishment'" and are nothing like the "fat-cat hedge funds you see on television," because they operate on extremely thin margins.
Still, if you need to use Bitcoin to flee a country or bypass censorship, an ETF will not help you at all, the analyst admitted. But for ordinary use cases, the mass-market investor is now choosing the security of major custodians rather than fighting wallet firmware alone, and $620 million in fresh inflows confirms it.
U.Today Editorial Team
Dan Burgin
