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BTC Coldcard vulnerability resulted in more than US$100 million stolen in Bitcoin. Experts say stolen Bitcoin may be difficult to cash in.
Galaxy Research said that the value of Bitcoin (BTC) stolen through the ongoing Coldcard wallet vulnerability has far exceeded US$100 million. But market commentator Joe Consorti believes it may be difficult for attackers to cash in most of the huge sum because every bitcoin is tracked on the public blockchain.
Consorti pointed out that this incident not only exposed the scale of the theft, but also demonstrated an often-overlooked feature of Bitcoin, the original cryptocurrency: even if the private key is compromised, the flow of stolen coins is still visible to law enforcement agencies, exchanges and blockchain analysts.
Transparency keeps stolen bitcoins under surveillance
Consorti posted on the X platform: "A thief who steals $100 million in BTC will have a hard time spending most of it. Every coin is exposed and tracked by Galaxy, the FBI and thousands of people." He added that Bitcoin was "probably the most unfit currency ever for crime." In the accompanying video, the analyst pointed out that the breach was not a failure of the Bitcoin network itself, but rather a fragile seed phrase generated by the affected Coldcard firmware (released after March 2021).
He also pointed out that even users who follow recommended self-hosting practices become victims because the underlying randomness used to generate wallet seeds is weakened.
Galaxy Research has so far confirmed that 1596 BTC pieces were stolen from approximately 7300 addresses in three waves of attacks. If suspected but unconfirmed activity is added, the damage could reach 2055 BTC, worth more than US$130 million. The company said that about 90% of stolen bitcoins have not yet been transferred, while all tokens in the previous three waves of confirmed attacks are still held in wallets controlled by the attacker. In addition, the company has shared all identified attacker addresses with U.S. law enforcement agencies, cryptocurrency exchanges, and blockchain investigation companies.
Despite the scale of the theft and widespread attention it attracted, as of press time, BTC was trading at close to US$64000, up 2% in 24 hours. Consorti cited this data and believes that the market has largely separated security failures from the Bitcoin protocol itself.
The first confirmed theft occurred on July 31, when 594.5 BTC pieces were stolen from approximately 500 addresses, involving four blocks. Coinkite, the company behind the Coldcard device, said the affected seeds only contained about 72 bits of entropy, rather than the 128 bits it should have, allowing attackers to guess the seeds with enough computing power. The company has patched newer firmware, but cannot repair seeds that have been generated on vulnerable devices, and recommends that users of Mk3, Mk4, Mk5 and Q devices move funds to unaffected hardware.
The debate over whether the stolen money can be laundered continues
Cryptocurrency commentator Shagun agrees with Consorti that blockchain analysis, compliance reviews and operational errors will make it far more difficult to transfer such a large number of stolen bitcoins than the theft itself. He advised the attackers to return the funds in exchange for a negotiated security bounty.
However, not everyone believes that thieves cannot cash in. It has been suggested that attackers could use privacy tools such as currency mixers, privacy coins, Taproot transactions and Lightning Network to cover their tracks.
