G’day Folks,

The last two days have been uniquely challenging for many of us grizzled and tenured Bitcoiners.

News that an exploit has been found in the Coldcard, which many (including myself) consider to be the ‘gold standard’ hardware wallet, has resulted in some cold storage wallets being drained.

This strikes at the very heart of what makes Bitcoin so special: our ability to safely self-custody and secure our wealth without trusted third parties.

I’m going to get right into it, keep things short and concise, and will cover the following topics:

• Overview of the exploit and risk profile.

• Summary of possible near-term and long-term solutions to consider.

Disclaimer: This article is general in nature and is for informational and entertainment purposes only, and it shall not be relied upon for any investment or financial decisions.

Additionally, since this article also deals with the technical details of self-custody, all opinions expressed must be viewed as the author’s opinions only (not advice of any kind). Please take all precautions necessary to thoroughly understand the nuances of any hardware or software wallet systems you consider using.

TL;DR

Please read this post in full if you are a Coldcard user.

Coldcard Exploit Overview

At the highest level, this exploit relates to the degree of entropy (randomness) that was used when generating seed words on a Coldcard device after the March 2021 firmware.

It has been found that the random number generator was not random enough.

This means an attacker can now brute-force ‘recreate’ a list of all potential seed phrases that Coldcards with this firmware would have generated.

⚠️ ACTION: Anyone who generated their seed phrase using a Coldcard from March 2021 onwards should assume that their seed phrase is compromised and cooly and calmly prepare to migrate to a new wallet.

This exploit thus far appears limited to Coldcard products, and does not impact other hardware wallet vendors like Ledger, Trezor, Bitkey, etc.

Categorising The Risk Profile

The most important thing to think through first and foremost is that this exploit specifically affects the seed phrase at the time of generation. This exploit only affects seeds generated using a Coldcard that was running post March-2021 firmware.

If a seed was generated on a vulnerable Coldcard but was then ported into another device (Ledger, Trezor etc), that seed remains vulnerable, and coins must be migrated off it.

If I were to categorise the risk profile for Coldcard customers, it would be in three tiers.

🔴 High Risk: Critical to migrate your coins as soon as possible if ALL of the following are true.

• Generated seed on a Coldcard device after March 2021 (or you’re unsure of the date).

• Did not utilise the dice-roll feature with at least 50 rolls during seed generation (if you cannot remember doing this, assume you did not).

• Do not utilise an additional BIP-39 passphrase ontop to secure your coins.

⚠️ ACTION: If you fall into this category, your seed words should be considered vulnerable and at risk. You must migrate your coins to a new and safe wallet ASAP.

Please skip ahead to the Potential Solutions section for some ideas on near-term and long-term options.

🟠 Medium Risk: Your coins are secure for now, but you should still plan to migrate them as soon as possible.

Assuming you generated a seed on a Coldcard device after March 2021 but also:

• Added dice roll entropy at seed generation.

• You do use a BIP-39 passphrase.

• You have a multi-sig setup, but some keys are Coldcard generated.

In these instances, you essentially have one or more layers of defence. Attackers can get the pool of possible seeds, but they must then go through the process of brute-forcing your passphrase or trying to match up M of N multi-sig keys to get the descriptor.

⚠️ ACTION: If you fall into this category, you are not at immediate risk, but you should act assuming your Coldcard derived seed is vulnerable.

🟢 Low to No Risk: Your coins are secure from this exploit if any of the following are true:

• You did not generate your seed on a Coldcard device.

• You did generate your seed on a Coldcard device, but before March 2021.

  • One way to quickly check this is to see if your wallet has any transactions that pre-date March-2021. If so, you are not affected by this exploit as your seed was generated before this bug made its way into the Coldcard firmware.

• You use a multi-sig setup which does not use an affected Coldcard generated seed as one of the keys.

• Your coins are held on a custodian or within an ETF.

• You use a multi-party custody solution like Casa, Unchained, or The Bitcoin Adviser (just to name a few that come to mind).

Action: If you fall into this category, you are unaffected by this exploit. You should however take this as a critical reminder to review your self custody setup.

Potential Solutions

For folks in the 🔴 High or 🟠 Medium risk categories, there are a few near-term and long-term options that I would suggest you consider.

Critically, if you need to migrate your coins, time is of the essence, however you MUST be calm, patient, focused, and limit distractions. The last thing you want to do is make a human error because you acted in a stressed state.

Take a deep breath, get a pen and paper, and write down your next steps.

Near Term Immediate Options

In essence, you need to migrate your coins to a secure private key. This is an interim hop for your funds to mitigate the immediate risk profile.

These include, in order of security preference:

• Another hardware wallet (Ledger, Trezor, Bitkey etc) with a freshly generated seed phrase. This includes an existing wallet you know for sure is safe and secure.

• Generate a software wallet using a desktop application like Sparrow Wallet, or a mobile wallet using an application like Nunchuk, or Blockstream.

  • I’ll provide clear text links below.

• Transfer coins to a custodian or exchange you already have a relationship with.

• If the only option you have is the vulnerable Coldcard, you must generate a new wallet using a strong passphrase, and transfer the coins to that wallet. This moves you from the 🔴 High to the 🟠 Medium risk category.

  • Coinkite has issued instructions for this process here.

⚠️ ACTION: I strongly recommend doing all of this with a pen and paper handy to write down your steps before you do them. Write down every seed phrase, passphrase and other critical detail such that you do not forget it during a stressful period.

Download links for wallet software I suggest:

• Sparrow Wallet (Desktop): https://sparrowwallet.com/

• Nunchuk (Mobile): https://nunchuk.io/

• Blockstream (Desktop & Mobile): https://blockstream.com/app/

Long Term Options

Once your funds are in a secure interim location, take a breath, slow down, and relax. You have mitigated the immediate risk, and now you can thoughtfully plan out next steps.

Generally speaking, your next steps will require some research and thinking to design and ensure you find the correct solution for your needs.

This should include seed security, hardware device selection, thinking about inheritance planning, and reevaluating the pros and cons of any solution. There is no one size fits all, and everyone will have their own preference.

One thing that this event should teach us all is that single signature security is insufficient for storing meaningful wealth over the long term.

Some potential options, in order of simple to complex. All have trade-offs, and neither simplicity nor complexity directly translates to ‘better’:

• Utilising a custodian or ETF: This is the simplest approach, but does introduce direct third party risk. There may also be tax implications of converting BTC into an ETF. For some, this may end up being the better solution.

• Engaging a multi-party custody provider like Casa, Unchained or The Bitcoin Adviser (just to name ones top of mind). These services provide guided setup of a multi-sig wallet where keys are distributed both geographically and across multiple vendors. You still retain custody of your coins, but with the added security of professional assistance and distributed keys.

• Establishing your own multi-sig wallet setup. This is the most advanced approach, but the general best practice for individuals uses a:

  • 2-of-3 multi-sig setup where coins require any two of the three keys to sign in order to spend.

  • All three keys generated on different hardware wallet devices (i.e. a Ledger, Trezor and a patched non-vulnerable Coldcard).

  • Those three keys get distributed into three separate locations.

  • Importantly, this setup also requires the wallet descriptor that connects the three keys in order to recreate the wallet. This is most important for inheritance planning, as your loved ones will likely struggle to work out what to do with three seeds.

  • There are also new products like Frostsnap (https://frostsnap.com/) which are designed to be a simplified device multi-sig user experience.

There are no doubt other solutions available, however for brevity these three are the most likely options for the majority of people reading this.

Concluding Thoughts

This particular event really hits home in a very different way to most news items.

It is an event where an exploit in one of the most trusted hardware wallet providers has resulted in Bitcoiners losing their hard-earned cold storage Bitcoin.

This is one of the most stressful and saddening events I can recall in my Bitcoin history.

I myself have long been a Coldcard advocate, and I still believe their device is one of the best designs for me personally. I was fortunate in that my seed was generated in the years prior to this firmware, and I also utilised dice rolls, passphrases, and multi-device multi-sig.

I also know that most people did not, and will not do this.

If you have been affected by this exploit, I am so very sorry, it is a grief that we feel across the entire industry.

If you find yourself in any way shape or form unsure of what to do, please reach out to me via any channel (Substack DM is best).

The industry will learn from this event, and many will reevaluate their self-custody arrangement as a result, mitigating future issues.

There is much more to say on this topic, but to get this out ASAP, I will leave it there.

Please reach out if you have any issues, I am happy to assist however I can.

Thanks for reading,

James

A big thank you to our Premium subscribers for another great batch of questions this month!

In today’s Q&A, James and Alec discussed topics including:

• Is Bitcoin’s long-term thesis still intact?

• What does a post-2027 recovery look like?

• Can Bitcoin reach US$1M?

• Does global liquidity still drive Bitcoin?

• BIP-110, and chain split risks.

• The Clarity Act

• Are AI data centres changing Bitcoin mining?

• Is it time to thoughtfully use leverage?

We hope you enjoy the session.

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Markets have settled into one of those phases where every day feels much the same as the last.

Price hasn’t gone anywhere meaningful, volume continues to disappear, and both bulls and bears seem to be waiting for somebody else to make the first move.

Today’s update is a walkthrough of the charts I keep coming back to during periods like this, and what they suggest about the current state of the Bitcoin market.

When markets are this quiet, it's often the underlying behaviour that matters more than the price itself.

Upgrade to Paid to access today’s Video Update (27 mins) and TL;DR Summary.

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Welcome to the July edition of our Q&A, where Premium subscribers can ask (and upvote) questions about the Bitcoin market, onchain analysis, and broader macro themes. We will record and publish the Q&A session later this week!

🔍 How To Ask Your Question

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Earlier this week, we had a fantastic question dropped into our Subscriber chat, and it really got my onchain nerd gears turning.

The question was asking what the significance is of the Cointime Price and Realised Price almost intersecting around $52k.

• Does this tell us something about the role Long-Term Holders play in setting market floors?

• Does it indicate that Bitcoin has developed or lost monetary premium value?

• Can we expect bear markets to be defended at higher levels?

Today’s piece is going to help subscribers think about these questions, and analyse why the Long-Term Holder cohort is arguably the most important to study at the current stage of this bear market.

Disclaimer: This article is general in nature and is for informational and entertainment purposes only, and it shall not be relied upon for any investment or financial decisions.

📈 You can find the charts from our articles on the Checkonchain Charting Website, and a guide in our Charts Tutorial Video.

Reintroducing Cointime Price

There are a few key points that Ian addressed in his question, which I will paraphrase:

• Does Cointime Price crossing above Realised Price signal a more mature monetary phase for Bitcoin?

• Are recent buyers such as ETFs and Strategy becoming more important than dormant buyers from prior years?

• Does the implied change in coin activity suggest that a permanent repricing to higher levels has occurred in recent cycles?

In my opinion, the answers to these questions are Yes, Yes & No, and Yes.

I will also add, that my answer to those questions would remain the same no matter which part of Bitcoin’s history we were talking about.

Every market cycle, Bitcoin sees coins repriced to higher levels. We also see a maturing market landscape, with more people realising that Bitcoin is a sound asset which is here to stay.

Recent buyers are always more important than dormant supply, with the one exception being around market extremes (bull peaks and bear floors).

The reason the Realised Price reprices significantly higher every cycle is because dormant coins took profit, and a new buyer acquired them at higher prices.

The reason Cointime Price reprices significantly higher every cycle is because even top buyers eventually come around to respecting that much cheaper prices are likely now a relic of history.

We will return to explore these two price models later in the piece. For now, think about these two price models as follows:

• Realised Price: Onchain value weighted average cost basis per unit of BTC in the supply (every coin is included).

• Cointime Price: Onchain holding time and volume weighted average cost basis for the coins which refused to spend in both the bull and bear.

Coins Are Rocks

Many of you know that my background is in geotechnical engineering, which is anything to do with the ground (basements, tunnels, excavations, mines, etc).

As a Sydneysider in Australia, I have worked with my fair share of Hawkesbury Sandstone, which is a very beautiful, and very strong sedimentary rock. Sedimentary rocks are formed when layers of soil are deposited over one another by wind or water, with the lower layers being under more pressure than higher ones.

As the rock becomes exposed to the elements, the upper layers start to degrade from the effects of de-stressing, erosion and water pressure entering the cracks and joints that open up between sections of rock.

We can think about the dormancy of the Bitcoin supply in a very similar way.

• More recently moved coins are more likely to move again, and represent almost all of the daily trade volume and network activity.

• The older a coin is, the more likely it stays dormant. Coins from Bitcoin’s earlier years are rarely spent, and disproportionately come back to life during raging bull markets.

This chart shows the proportion of the ~20M circulating BTC based on the year when they last transacted. You can see how the 2009-2016 coins still represent around 18.2% of the BTC supply, but their proportional dominance decays over time (they are either spent into a new year, or ‘diluted’ by both those that are, and newly mined supply).

Modern supply (2023+) currently represents the lion’s share of the supply at 59.3%, whilst Bitcoin’s middle years (2017-22) are an additional 22.5%.

Whilst those coins from prior cycles represent a very meaningful chunk of the BTC supply, they were last moved at historically cheap USD realised prices.

Coins last moved before 2020 represent 27% of the BTC supply, but are less than 1% of the total realised capital invested in the network.

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The Bitcoin price has been edging higher in recent weeks, after recovering the 200-week moving average around $63k. The market did experience a weekly close below the 200WMA towards the end of of June, but has since held above it for four consecutive weeks.

Whilst the 200WMA is just a line on a chart, it is one that is widely observed by investors and traders, particularly those with more experience, and longer investing time-horizons.

Why this specific period of moving average became a common ‘deep value’ price model across numerous asset classes is a mystery of history and human behaviour. However, in the world of Bitcoin, we have a somewhat unique lens to visualise and model what investors do around that level.

In today’s post, I will explore how the Bitcoin supply structure has changed since hitting the 200WMA in early June. I’ll also analyse a series of momentum divergences which are well underway in developing under the market hood.

Become a Premium subscriber to access today’s Video Update (37 mins), Written Article and TL;DR Summary.

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The Bitcoin price is just chopping wood around the 200WMA, and it feels like absolutely nothing is happening.

Trade activity has fallen to cycle lows, long-term holders continue absorbing supply, and yet a handful of interesting divergences are quietly developing beneath the surface.

Today, I thought I’d jump into the set of charts I routinely pull up to get a big picture overview of market conditions, so you can see how my analysis gears spin.

Even amidst the chop, we can still divulge information regarding how investors and traders are behaving under the surface.

Become a Premium subscriber to access today’s Video Update and TL;DR Summary.

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Markets are complex and dynamic systems, and understanding them requires thinking in scenarios and probabilities.

It is impossible for us to know the future, although that certainly doesn’t prevent us from making an educated and informed guess.

When I analyse the Bitcoin market, I use a variety of datasets which represent sectors of market participants. Each sector (e.g. onchain, ETFs, or derivatives) tells us a story about what people are doing, and how they are behaving.

No model is perfect, and no analyst will ever predict the future correctly every time.

Over the last few months, I have read at least half a dozen bear market reports by analysts and firms which all paint a similar picture for Bitcoin in this bear. I see the same scenario painted all over X almost every time I take a peek at what’s happening on that side of the fence (which is increasingly infrequent these days).

The consensus view for Bitcoin appears to be that the bottom is far from in, and there’s a general expectation of a final low somewhere in the mid to low $40ks.

This scenario is not my base case view, and not what my analysis of the data suggests is the most likely setup. That said, I’m certainly not naive enough to pretend that my thesis is guaranteed to be correct. The market will clear wherever it wants to clear, and I need to remain open minded for alternative scenarios.

In this piece, I’m going to lay out my prevailing bear market thesis, and then challenge it with the scenario where the price of Bitcoin falls down to $45k.

Become a Premium subscriber to access today’s Video Update (33 mins), Written Article and TL;DR Summary.

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One of the most popular questions we received in our latest subscriber Q&A asked how high Bitcoin may run in the next bull market.

It is obviously impossible to answer this question with any accuracy, but that doesn’t mean we can’t make a reasonable effort to model it out, and indulge in a little speculation.

Today’s post is going to give us a break from the bear market, and instead run an analysis to punt on where the next Bitcoin cycle high may be.

One day, we will of course hit the price I identify in this piece, at which point I will drop the paywall and gloat on twitter saying ‘see, we called it!’.

Time to speculate on the number go up technology that Bitcoin is.

Become a Premium subscriber to access today’s Video Update (25 mins), Written Article and TL;DR Summary.

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We’re back with our monthly discussion between from and James about all things Bitcoin and macro.

In this conversation, James starts out with the key onchain and technical charts he is using to navigate this bear market. We analyse how our interpretation of onchain cohorts must evolve as the market cycle progresses and investor sentiment changes season.

Nik then explains why the strengthening US dollar, particularly against key Asian currencies, is coming increasingly to the foreground. Interest rates, oil prices, and equity market wobbles are on his radar, but the strength of the king dollar is what he believes should be commanding our attention right now.

Paid subscribers will find the discussion between Nik and James below.

Become a Premium subscriber to access today’s Video Update (1hr).

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Buy high and sell low, it’s age old wisdom that stands the test of time.

The higher the price you buy, and the lower the price when you sell, the larger the loss, and the better your overall net worth will be in the long-run.

The 2026 bear market has been so ruthless, that even the most Diamond handed dude Michael Saylor has sold 3,588 BTC at the basement bargain price of $60k.

All jokes aside, there is both rhyme and reason to what Strategy is doing, and the market has responded relatively well given ‘the only buyer’ has turned into a seller.

Makes you wonder, as all the critics have been saying that Saylor is the only dude who has been buying Bitcoin…if he’s now selling…who on earth is buying?

Upgrade below to access today’s Video Update (33 mins), Written Article and TL;DR Summary.

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Thanks to our Premium subscribers for another fantastic batch of questions this month!

In this Q&A session, James and Alec cover everything from bull market targets and cycle theory to Strategy, BIP-110, and where we think this market is headed, including:

• Next bull market upside from a $50–60k bottom

• Is the four-year cycle still intact?

• Does the data support a $40k BTC bottom?

• Is Strategy’s capitulation phase almost over?

• James’ view on BIP-110

• What would make us turn bullish?

• Where do we expect Bitcoin to bottom?

• Are long-term holders still selling?

• Are diminishing returns the new reality?

• James’ favourite research sources

We hope you enjoy the session,
James & Alec

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We had a great call today, covering key slides from our latest Bitcoin Monthly Report. Big thanks to all the attendees and those who raised their hands to participate in the session, we highly value your input!

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The last month has been a chaotic one for the Bitcoin market, with prices setting a marginally lower low at $58k, and with a significant break-down in Strategy’s preferred and common stock prices.

These are the dynamics one would expect to see in a late stage bear, and despite the apparent headwinds, downside momentum seems to still be waning.

In this month’s Orange report, I present a set of models and ideas to reason about what this late stage of the bear may look like. I also provide an assessment of the position Strategy is in, and reflect on their latest updated framework for how they plan to manage their balance sheet.

Orange Members will find the report PDF, and details of our upcoming monthly conference call below.

Note: This monthly report & upcoming conference call is exclusive to Checkonchain Orange subscribers - which is our upper-tier plan within Substack.

If you would like to learn more about Orange, or access a single monthly report + conference call recording, please click the button below.

Learn More About Orange Plan

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For those who were not around last cycle, there was an army of folks who bought their first slugs of Bitcoin around $58k during the two rounded tops in the 2021 bull cycle.

Folks who top blasted $58k in the last cycle wear their buys as a badge of honour, and rightfully so. They survived the brutal decline of the 2022 bear, and learned a tonne of lessons about themselves along the way.

It is a tremendous life experience to watch your net worth plummet by over -70%. It forces you to either come to terms with what you own and why through rigorous study…or to capitulate everything when the pain gets too much.

Here we are, five years later and the $58k gang rides once again.

As you can probably imagine, the market conditions at $58k in 2026 are vastly different to those at the stimulus fuelled tops in 2021. Today’s report will be an analysis of how the market is reacting to the market probing the bear cycle lows, and why my expectations are in the weeks and months ahead.

Upgrade below to access today’s Video Update and TL;DR Summary.

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Welcome to the June edition of our Q&A, where Premium subscribers can ask (and upvote) questions about the Bitcoin market, onchain analysis, and broader macro themes. We will record and publish the Q&A session later this week!

🔍 How To Ask Your Question

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There is a lot happening right now, both from a macro perspective, but also within Bitcoin, as Strategy’s digital credit instruments get whacked lower once again.

I’m going to get right into the analysis today for paid subscribers.

I’ll cover the macro landscape, the negative market impact I believe Strategy is currently imposing, and how I am thinking about Bitcoin as it trades below $60k.

Upgrade below to access today’s Video Update (42 mins), Written Article and TL;DR Summary.

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The Bitcoin market is dead quiet.

No price movement.

Cyclically low trade volumes.

Sentiment in the absolute gutter.

Absolutely nothing is happening, and the market is in a state of total and complete apathy.

These are the conditions we historically see as we approach the pointy end of a bear market, where hopelessness peaks, and the maximum number of people start to truly believe the asset is never coming back.

Today’s post will be an assessment of the current market setup, and how I am thinking about what I suspect will end up being the last major chapter of this bear.

Upgrade below to get today’s Video Update (32 mins), Written Article and TL;DR Summary.

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I wake up to see this ugly-ass looking chart of an asset which is supposed to trade at $100, on low volatility.

Strategy’s preferred stock Stretch (STRC) has taken a nose-dive, which rightfully has many questioning whether this is the market sending a more damning signal.

Today’s post will specifically focus on my thoughts around Strategy (MSTR), and this break-down in their preferred stock prices.

I will also share what impacts this has on my current and future allocations to Strategy related assets, as I have made a few decisions in recent weeks, which this event only works towards cementing.

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Very rarely does the absolute value of a metric matter as much as its rate of change.

Both the financial media, and the twitterazzi love quoting some magic metric that has hit some special new level that explains everything that happened that day. In my experience, what actually matters is how quickly it got there, and whether it is in the process of speeding up, or slowing down.

Late stage bear markets feel like they just drag on…and on…and on….

The monthly chart is red, the weekly chart is red, and the daily chart is red.

However, every day that the gears on this pain-factory grind forwards, the capitulation process works its way through more and more of the folks that only destiny knows will ultimately sell the cycle bottom in disgust.

What remains at the end of this gruelling process, is a hardened holder-base of tenured HODLers, who know exactly what they own, and why they own it.lllllll

The headlines continue to say that Bitcoin is in a deep bear market, with many pundits expecting it has much further to go. The absolute values which measure this bear market, are certainly quite bearish.

What really matters, is the rate of change, and to my eye it is starting to tell a different story.

Become a Premium subscriber to access today’s Video Update (49 mins) and TL;DR Summary.

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