Coldcard Exploit Pushes Bitcoin Users Back to Exchanges

A serious firmware vulnerability in Coldcard hardware wallets has led to the theft of at least 1,596 Bitcoin. The flaw, which dates back to 2021, allowed attackers to recreate private keys by exploiting a weakness in how the devices generated recovery seeds. Experts estimate that total losses could climb as high as 2,055 Bitcoin as investigations continue.

The crisis has forced thousands of users to move their funds to new wallets or temporary storage, driving Bitcoin network activity to three month highs. Because these transfers appear as spending on the blockchain, the sudden surge in movement has caused significant congestion in the network mempool. Many users are opting to move their holdings onto centralized exchanges for safety while they sort out their security arrangements.

This shift has caused exchange reserves to climb by roughly 17,500 Bitcoin in just one week. While this increase in exchange supply sometimes signals potential selling pressure, much of this activity appears to be a defensive move. Users are looking for a secure place to hold their assets while they wait to set up new, clean self custody solutions.

Security researchers warn that this chaos has created a new opening for scammers. Fraudsters are impersonating support teams to trick victims into sharing their recovery phrases during the migration process. Users should ignore unsolicited migration advice and only manage their recovery seeds through trusted, offline hardware device interfaces.