Coldcard Carnage
How the Coldcard fallout reshaped Bitcoin’s narratives and revealed its real leaders.
Heartbroken.
That’s the only word that comes to mind when I go back and reflect on the last week. We’re going to get into a handful of the different narrative and sentiment charts down below, but my own personal sentiment is in the gutter right now.
I’ve personally recommended Coldcard to people in the past and was a huge fan of their products.
I was wrong.
I feel terrible.
We all deal with grief and hardship differently, but in challenging times I like to make the people around me smile. I’m not just an optimistic contrarian when it comes to bear-market Bitcoin. I also like to double down on optimism when life gets hard.
And that’s the spirit that I’m going to give to this piece.
There’s a lot of division out there still, there’s still fighting, but there’s also a great deal of things to be grateful about out there and I’m hoping to highlight some of those today. This was a devastating event, but I believe it also revealed something incredibly admirable about the Bitcoin community.
With that said, we cannot simply pretend the last week has been all sunshine and rainbows and in order to more accurately understand where sentiment is at right now we’ll certainly have to explore some of the more negative moods… but you have my promise that we’ll also wrap up with some positivity.
Coming Together
Before the Coldcard exploit began there was an insane degree of division, but the thing I was most impressed with this week was how much people have come together and helped one another.
This division still exists, but it took a seat in the background.
The thing that came to the forefront was helpfulness, concern, and care.
Two things are new here for people that have been following this work.
We’re much more zoomed in on daily emotional swings
I’ve never measured “caring” before
There are good reasons for both. I usually find broader emotional regimes and the psychological state of the Bitcoin community more revealing than isolated daily spikes. But this change was too stark not to share as it captures both the scale of the move and the amount of care people showed one another.
Care on the other hand is an emotion I’ve largely kept unsurfaced (despite the fact I’ve spent a metric shitload of compute calculating these things) because it is typically less interesting in the context of price moves in the market.
But we’re in a weird situation, so I’m surfacing some novel data… with that said, here’s a look at another emotion I’ve never shared before.
Sadness.
Once again we’ve zoomed in a bit closer here to the measurement taken immediately after the event, but you can see the obvious movement.
No alpha here.
I’m not pretending this is some shocking revelation.
But if you are anything like me it can often be helpful to visualize some of the moods of the broader space. Not with the intent of trading it or predicting the market, but in this case I hope it’ll help you to feel slightly less alone.
I’m quite fortunate in that I was able to help the people I recommended Coldcard quickly and none of their funds were lost. But this event hits much more deeply because it feels like a fundamental shift in Bitcoin history and a reorganization of the Bitcoin community (we’ll wrap up describing some of these different cohorts and how they’ve changed).
I’m traveling right now and trying to stay as busy as possible and away from the timeline, but every single time my mind comes back to it I feel grief for everyone out there who did everything by the book and still lost everything.
Many people come to Bitcoin because they feel as though they haven’t been served by the traditional system. They felt screwed over by the traditional system and believed they had found something that could help them escape it. Some of those people will now feel screwed over by Bitcoin too.
For many plebs, that sadness will hardened into increased disapproval.
I promise that I’m going to end this on a positive note, but this is not just a positive experience and it’s my duty to surface this information to you. The pleb cohort that I track is as disapproving as ever.
Who they are disapproving towards has changed, what was recently Saylor for selling Bitcoin has now shifted towards NVK, but the root emotion remains.
And can you blame them?
Imagine you came into this space, were incredibly frustrated by watching your purchasing power decrease over time, and felt as though you had found a lifeboat to escape from the existing painful system.
You bought into that narrative.
You stayed humble.
You stacked sats.
You did so following the advice of people much more experienced than you in the space… then lost everything.
It’s brutal and the more I type this out the more upset I get about the issue.
I have a lot of thoughts here, and I’ve seen some people in the space say some things I think are profoundly stupid, but in the spirit of staying more positive here I’m going to keep them to myself.
Instead we’ll do a brief look through how some of the narratives have shifted over the last week.
Narrative Shifts
The first time I saw this chart it blew me away. I’ve seen a lot of narratives come and go while investigating this community, but never one that shot up in a straight line quite like Coldcard.
I plan to keep measuring this closely as we are only in the initial stages of watching this play out, but this (in my opinion) is a tectonic shift in the Bitcoin ecosystem.
From a narrative perspective things like IBIT, ETFs, multisig, Bitkey, Trezor, Casa, and Ledger are all seeing massive shifts. The custody landscape will undoubtedly change, and some products and services will emerge stronger. But we should be careful about drawing conclusions from the first few days. The immediate spike is dramatic, but I personally think the long-tail emotional and behavioral response will be the most interesting.
Self custody was one of the biggest movers.
“All PR is good PR right?”
Ya...
I don’t think it’s too bold to say that this event is likely to cause a large shift in the way people approach custody moving forward. I’d expect multisig companies to be doing record numbers over the last week, and I don’t anticipate that dropping off anytime soon.
This event has caused me to personally think long and hard about what I will be comfortable recommending to people again in the future. There are a few different narratives evolving out there around it:
“People should just be using ETFs.”
“Self custodial Bitcoin is dead.”
“No one should use single-sig custody ever again.”
To be completely honest, part of me understands all of these arguments. But one lesson I’ve learned from studying sentiment is that intense emotion makes it much harder to think clearly about the long term.
Many of these narratives could be correct, but only time will tell.
And (going to be contrarian optimistic again) I do think there are some positive takeaways.
“Are you kidding me? Are you delusional?”
I’ve been called delusionally optimistic before, but one of Bitcoin’s most powerful qualities is its antifragility. I expect custody practices to change dramatically, and I believe the pain of this failure will eventually become lessons that harden the ecosystem as a whole.
I also think there were some social shifts that are a long-term net benefit for Bitcoin that we’ll get to at the bottom… but before we do, let’s quickly talk about the elephant in the room.
I’m not going to dwell here for too long in the spirit of staying away from divisive debate, but I do think the drop-off in the BIP-110 mention rate is one of the most important narrative shifts that might have slipped beneath the radar.
With less than a week until flag day and miner signaling not going to happen this couldn’t have happened at a much worse time for those supportive of BIP-110. I’ve seen many narratives starting to form claiming that the timing is suspect and not a coincidence.
“That’s absolutely idiotic.”
I don’t find those suspicions persuasive either, but I also don’t want to get deep into the BIP-110 debate again here.
Instead, I want to mention that my data showed technical individuals on both sides of the debate dropping everything they were doing to help people in need. The community may be divided on this, but the goodness of human beings came out and people helped one another wherever possible.
I’ve even noticed people crossing “party lines” to assist folks and I find that to be incredibly admirable and I respect this behavior deeply.
Closing Thoughts
We are no longer one big happy group of Bitcoiners.
The community is more fragmented than ever, and the Coldcard fallout made those divisions especially visible. The contrast is clearest across the cohorts I wrote about in The Fracturing Ideologies of Bitcoin.
Each group was impacted by this in a dramatically different manner:
Bitcoin Capitalists - By far the least effected from a sentiment perspective. Although many of them discussed the issue and some did surely lose coins in the hack, this cohort disproportionally holds ETF/treasury company shares and has long been the biggest proponents of institutions broadly. They likely feel justified, and I’ve seen many people running victory laps about the situation.
Bitcoin Fundamentalists - By far the most negatively affected by the situation. Bitcoin purists were Coldcard’s core target market. This group was also the most likely to support BIP-110 and has long been the most frustrated and angry. I’m not saying this to dunk on them. Quite the opposite. I think they are especially deserving of our empathy right now.
Bitcoin Technologists - Still the group that impresses me most. In The Fracturing Ideologies of Bitcoin, they were already more constructive and optimistic than the other cohorts. That pattern remains, but that’s not why I’m impressed…
The Bitcoin Technologist cohort is made up of people with a deep technical understanding of the Bitcoin protocol.
They are the builders and creators in the space.
While the Capitalists checked out and the Fundamentalists experienced more pain (huge generalization, but directional consistent with what I’m seeing in the data) the Technologists stepped the hell up, took action, and helped out where they could.
Bitcoin is evolving and this event feels like a changing of the guard in some ways.
The hardware wallet most closely associated with Bitcoin Fundamentalists was the cause of incredible pain and challenged the assumption that ideological purity necessarily produces the safest custody tools. Products and services built by more pragmatic teams (teams willing to accept pragmatic tradeoffs) may ultimately prove more resilient than strictly Bitcoin-only offerings.
Some subset of people in the Bitcoin Capitalists cohort ran victory laps about how self custody was always a joke and how people should just own the ETFs, while at the same exact time the Bitcoin Technologists dropped everything in their lives and did whatever they could to help people out.
Actions speak louder than words.
The actions of the Bitcoin Technologists were incredibly admirable, reminding us how many brilliant, helpful, and capable people still define this space. As I’ve highlighted in previous pieces, this group tends to be more action-oriented and more positive than the broader Bitcoin community.
That pattern continues today.
This was a catastrophic event, but it showed us who the real leaders in this space are.
It showed us who steps up in an emergency. It showed us who drops old grudges, crosses ideological lines, and helps when the community needs it most.
The brilliant engineers and technical people in this space have always been at the heart of Bitcoin.
Over the years, I think some people forgot that.
I’m still heartbroken by what happened, but watching this group respond reminded me that there are still people in Bitcoin worth believing in.
That doesn’t undo the damage, but it gives me hope that something better can be built from it.
P.S. Thanks for taking the time to read. If the final chart looks a bit different here because it’s a screenshot taken directly from my new paid subscriber dashboard. This was BY FAR the most highly requested feature so I’m pumped it’s finally ready to share. Paid subscribers can now play around investigate the sentiment of Capitalists, Fundamentalists, Technologists, and broader Bitcoin community across a handful of selected charts.
Saylor has talked about leaving his personal holdings to the network. It would be a great gesture to make good those who lost their bitcoin