A $116 million Bitcoin wallet vulnerability triggers self-custody review, ETF capital inflows contin

The $116 million hardware wallet vulnerability rekindled the core controversy in Bitcoin: The real risk trade-off between self-custody and regulated products

A $116 million hardware wallet security vulnerability has once again triggered the old question in the Bitcoin field: What are the risk trade-offs between self-custody and using regulated products? The debate is becoming increasingly heated as U.S. spot Bitcoin ETFs continue to record strong inflows-a sign that institutional capital may be looking for ways to participate in the Bitcoin market without directly taking on custody and operational risks.

At the same time, several major companies in the industry are taking action, highlighting the increasingly close connection between Bitcoin, corporate balance sheets, and emerging AI computing needs. Strategy (formerly MicroStrategy) is preparing to resume Bitcoin purchases after a rare sell-off period; Riot Platforms is reportedly planning to use its mining resources to reach a large AI computing deal; and Trump Media said it will review its crypto asset strategy after suffering a large quarterly loss.

Core Points

A hardware wallet vulnerability related to Coldcard resulted in the theft of approximately $116 million in Bitcoin, injecting new gunpowder into the debate between "self-custody" and "custody by others." The net inflow of U.S. spot Bitcoin ETF was about US$1 billion during the week, which Bloomberg analyst Eric Balchunas called one of the strongest inflows since October last year. Strategy CEO Phong Le said the company plans to resume Bitcoin accumulation later this year after selling some Bitcoin over multiple quarters to meet shareholder obligations. Riot Platforms is reportedly deploying 191 megawatts of computing power for a "cutting-edge AI" project at its Texas campus, highlighting the economic appeal of power supply. Trump Media is adjusting its digital asset strategy and re-planning the way it finances and manages its Bitcoin holdings after recording huge unrealized losses.

Strategy releases a return to net buying signal

Strategy CEO Phong Le said that the company plans to resume Bitcoin accumulation later this year to consolidate its long-term position. The company's smaller sell-off had previously raised questions about its early commitments. The company has publicly stated its "never sell" stance, and changes in actual behavior have become a key topic for investors-who want to know whether the company is still dominated by pure acquisitions.

According to Le, Strategy purchased approximately 175,000 bitcoins this year and sold approximately 7,000 bitcoins. This ratio suggests that despite selling at certain points in time, overall net buying remains. Strategy currently holds more than 840,000 bitcoins and is the world's largest institutional bitcoin holder.

Le also pointed to several discrete selling events. According to reports, the company has sold bitcoins four times since May, the most recent of which was 1,690 bitcoins to pay preferred stock dividends, share buybacks and build U.S. dollar reserves. This detail is important because it reveals the tension between corporate treasury behavior and a strict "hold only" narrative: Shareholders still need liquidity, and Bitcoin's role on the balance sheet may force companies to weigh capital needs against accumulation goals.

report suggests that this model becomes more difficult when a company's share price falls below its Bitcoin net asset value, because financing may be more dilutive and subsequent financial support will be more difficult to maintain. For Strategy, this background helps explain why investors focus not only on the size of their purchases, but also on the timing and clear intentions of future net purchases.

Concern about self-custody resurfaces, ETF capital inflows rise

According to reports, even though the bitcoin price trend remains sluggish, the U.S. spot bitcoin ETF is still in demand. Cited reports showed net inflows into ETFs of about $1 billion during the week, the third-best week since October last year-something Bloomberg analyst Eric Balchunas described as a "silent IPO" for Bitcoin.

The term "silent IPO" means that early holders or initial investors may sell off in a wave of institutional buying brought by ETFs, which helps explain why new capital inflows did not immediately push prices higher. In this sense, the ETF rally is more than just a headline number: it is a reminder that ETF demand can coexist with market supply dynamics, preventing the market from rising at the rate that some observers expect.

The timing of this rebound in demand is also noteworthy considering the hardware wallet incident. Previous reports have pointed out that a Coldcard-related vulnerability originated from a key generation flaw that resulted in the theft of approximately $116 million in Bitcoin. Balchunas said the incident could increase the attractiveness of ETFs in the long run to investors worried about the risks of self-custody-although he emphasized that the link could be a correlation rather than a causal one.

He warned against assuming causality based on a single data point, but suggested that "in the long run" if self-custody concerns persist, some investors may turn to ETF structures. The practical lesson for market participants is that custody risk is now part of investor discussions, rather than just a technical footnote. If institutional investors continue to view ETFs as the most direct route to operational exposure, ETF demand may remain resilient even if overall market confidence fluctuates due to security events.

Riot uses power resources to carry out AI computing cooperation

It is reported that Riot Platforms is planning to launch a large-scale computing cooperation project based on Bitcoin mining infrastructure. According to reports, Anthropic and Riot have reached a $9 billion deal to obtain 191 megawatts of computing power from Riot's Texas campus, highlighting the fact that stable power supply is becoming increasingly valuable as AI data center construction faces bottlenecks.

Riot said it has signed a 20-year agreement with a "cutting-edge AI" company to provide 191 megawatts of electricity from the Rockdale campus, which Bloomberg identified as Anthropic. The announcement follows Anthropic's previous $19 billion data center lease with TeraWulf, further reinforcing the general trend of AI companies seeking additional computing power and stable energy sources.

The report lists Riot as one of a growing number of mining companies expanding into AI-related strategies, and lists other examples such as Bitdeer, CleanSpark, MARA Holdings, Core Scientific, Hut8 and IREN. While Bitcoin mining remains the original intention of these companies, integration with AI is changing the way investors view the long-term value of their assets: power supply and grid agreements can become "platforms" for a variety of high-demand workloads.

The cited discussion also points to Bernstein's research showing that collaboration between AI companies and mining companies can help alleviate power bottlenecks that limit data center expansion. Even if the details of each company's arrangements vary, the key point for crypto investors is that mining companies 'balance sheets and future cash flows may increasingly rely on energy leverage, not just the economic benefits of Bitcoin mining.

Trump Media adjusts its crypto asset strategy after huge losses

Trump Media said it will adjust its digital asset strategy after a net loss of US$238 million in the second quarter, and pointed out the balance sheet risks posed by companies holding crypto assets and crypto-related securities. The company attributed part of the loss to unrealized market value fluctuations in its digital assets and securities.

In its quarterly report, Trump Media reported unrealized losses on its digital assets of $190.4 million. The company also pledged digital assets and equity securities in the second quarter, indicating that its asset exposure is limited by collateral requirements and counterparty structures.

Bitcoin positions also changed during the quarter. Trump Media reported that it held 9,477.16 bitcoins as of June 30, down from 9,542.16 in the previous quarter. In July, it sold $159.6 million worth of bitcoin-related securities and used the proceeds to buy more bitcoins. By July 31, its position increased to approximately 14,139 bitcoins, worth $890.5 million.

Management warned that generating additional revenue from its Bitcoin holdings could expose the company to counterparty risk-especially if a partner defaults or goes bankrupt. It also noted that in some cases, companies may not be able to recover bitcoins pledged under unsecured arrangements.

The company said it plans to invest more resources in Truth Social, Truth+ and other media businesses as part of a broader capital allocation adjustment. This is a reminder to readers that corporate crypto strategies are not just about directional exposure; they also involve operational risks in liquidity management, collateral frameworks, and financing structures-risks that can have very different results than purely spot holding.

Looking to the future

In the future, the market may pay close attention to whether the strong momentum of ETF inflows can continue, as more security incidents will test investors 'confidence in self-custody. At the same time, corporate decisions-whether Strategy's clear intentions translate into continued net purchases, or how companies such as Riot and Trump Media manage computing needs or custodiment-related risks-will continue to influence how Bitcoin is absorbed by groups other than native crypto participants.