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Points of Focus
- Coldcard’s seed flaw sparked a rush to safer wallets.
- Small Bitcoin transfers hit their highest level since FTX.
- A software update cannot repair older, weaker seeds.
Late July saw Bitcoin users rushing to move their holdings after a flaw in Coldcard hardware wallets came to light.
The number of active Bitcoin addresses surged from 645,000 on July 30 to 1 million on July 31, according to analytics firm CryptoQuant.
Coldcard Incident Triggers Large-Scale Bitcoin Migration, Small Transfers Hit Highest Level Since FTX Collapse
According to CryptoQuant, Bitcoin holders moved funds on a large scale following the Coldcard security incident. On July 31, daily active Bitcoin addresses surged from… pic.twitter.com/v5awdSy3wQ
— Wu Blockchain (@WuBlockchain) August 4, 2026
Transfers of less than 1 BTC each made up most of the activity, and totalled 39,600 BTC on July 31. This was the most small Bitcoin transactions in one day since November 16, 2022, days after the FTX exchange failed. The one-day surge illustrates how quickly holders reacted once news of the flaw spread.
That said, one might think the numbers look like panic selling, but transfers do not inherently mean sold Bitcoin. Many users moved funds to safer wallets. Think of a family moving cash after learning its safe is easily broken.
What went wrong with Coldcard?
Coldcard is a hardware wallet that stores keys offline. When a user sets it up, the device creates a list of recovery words called a seed phrase. Those words can rebuild the wallet if the device is lost or damaged.
However, some versions of Coldcard software had a weak backup method for creating these words, which allowed attackers to choose from fewer possible seeds than they should have when recovering a victim’s wallet.
Said attacker could test those possible seeds, create the wallet addresses linked to each one, and compare them with Bitcoin’s public blockchain. If an address held coins, the attacker could use the matching seed to open the wallet and steal them.
Coinkite, the company behind Coldcard, has fixed the software, but it cannot strengthen an old seed. Anyone with an affected seed must create a new one and move their Bitcoin to the new wallet.
Why Bitcoin activity jumped
CryptoQuant said the rise came mainly from an increase in sending addresses, which could easily be users rushing to move their Bitcoin to safer wallets.
But one person can control many addresses. For example, Mia may keep Bitcoin in three old addresses. If she sends all three balances to one new wallet, the blockchain records four active addresses. Yet, only one person moved funds. This can make network activity look larger than it actually is.
What Bitcoin users should do
Coldcard users with one of these weaker seeds should install the wallet’s fixed software and use it to create a new seed.
They should then confirm the new wallet address and send a small test payment before moving the full balance, similar to sending $1 before making a large bank transfer. Users should keep both seeds private during the move.
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