A vulnerability in the Coldcard hardware wallet has reignited concerns over trust in crypto self-custody after 594 BTC was stolen from about 500 bitcoin wallets.

U.Today, a blockchain outlet, reported on Aug. 2 that bitcoin analyst Benjamin Cowen said the incident showed the crypto market still has not gained public trust.

Cowen said on X, formerly Twitter, that he does not often comment on the news, but it was devastating that users suffered huge losses while storing bitcoin in a way they believed they could trust. The shock was greater because Coldcard has long been seen as a relatively safe hardware wallet for bitcoin self-custody.

The problem was in the seed-generation process. Vulnerable firmware versions could generate wallet seeds using predictable inputs rather than relying solely on high-quality hardware entropy. Investigators believe attackers exploited this to reconstruct private keys and withdraw funds. If a flaw occurs at the private-key generation stage, a core security step of hardware wallets, the advantage of offline storage can also be undermined.

Blockchain investigators found that 594 BTC was stolen from about 500 wallets. Many of the affected wallets had shown no movement for years before balances drained in a short period. Most of the stolen bitcoin was then consolidated into a single address, pointing to signs of coordinated theft rather than isolated incidents.

The fallout from the incident is spreading into a broader trust problem for self-custody. Hardware wallets have been used to reduce reliance on exchanges and online services and allow users to store assets directly. But as a flaw emerged in the private-key generation process of a security product seen as highly trustworthy, concerns are growing that anxiety among users who chose self-custody could increase.

Cowen linked the incident to structural problems in the crypto market. He said the market remains swayed by scam memecoins, rug pulls and recurring security flaws. Regardless of how safely the technology is designed in principle, repeated large-scale losses leave the general public with little choice but to see crypto investing as overly risky, he said.

The incident showed that a vulnerability in a specific security product can spread into a broader trust issue across the crypto market. As losses occurred in a self-custody tool chosen to avoid the risks of centralised services, demands are expected to grow for stronger verification of hardware wallet firmware stability and seed-generation procedures.

I don’t comment on the news very often, but it’s devastating to see so many people lose so much Bitcoin while doing what they believed was the right thing. People wonder why retail participation has been fading for years, yet the space continues to be dominated by scam…