Bitcoin on-chain activity surges as Coldcard attack raises security concerns — K33

• Bitcoin on-chain activity rose to a yearly high following the Coldcard attack, with 1,596 BTC reportedly stolen from 7,300 addresses.
• Spikes in Bitcoin's active supply often coincide with periods of market stress, characterized by panic selling, profit-taking or FOMO.
• K33 warned that Strategy's capital-allocation model remains vulnerable to Bitcoin downturns, potentially forcing BTC sales during weaker market conditions.

Bitcoin (BTC) on-chain activity has surged to its highest level of the year following attacks targeting Coldcard hardware wallets, according to a K33 report on Tuesday.

Coldcard attack boosts Bitcoin on-chain activity

The firm stated that 890,000 BTC were moved on-chain over the past week, marking a new yearly high. The recent Coldcard attacks, which resulted in an estimated 1,596 BTC being stolen from approximately 7,300 addresses, triggered the spike in on-chain transfers.

The attacks exploited a firmware bug that generated insufficient randomness during the wallet setup process. K33 noted that the weakness made seed phrases predictable enough for attackers to rebuild private keys and remotely steal Bitcoin from the flawed wallets.

"Therefore, the recent acceleration in BTC transaction activity is very likely driven by the Coldcard attacks," K33 wrote.

Although the incident was specific to Coldcard, K33 noted that it may have broader implications for the hardware wallet sector. The attacks have heightened concerns about the security of other hardware wallets, including Ledger and Trezor, while prompting some users to consider centralized custodians or multisignature arrangements.

K33 also highlighted the historical relationship between elevated on-chain activity and periods of market stress. The firm stated that spikes in active BTC supply have typically emerged near local market tops or bottoms. Such activity reflects panic selling during market declines, but points to profit-taking and fear of missing out (FOMO) during stronger markets.

Strategy strengthens USD reserve, faces pressure with capital allocation model

On the institutional side, K33 shared that Strategy faces no imminent risk of being forced into a major Bitcoin sale. The company has rebuilt its US Dollar reserve to approximately $4 billion, giving it enough cash to cover current dividend obligations until November 2028.

The stronger reserve position represents an improvement from late June, when the company's reserve had fallen below $1 billion, and its STRC preferred stock was trading below $85. Strategy had targeted a price range of $99 to $100 for STRC.

Strategy has raised $3.13 billion for its US Dollar reserve since May 29. Much of the funding came through its at-the-market (ATM) program, under which the company sold approximately 34.55 million shares for $3.45 billion. It also sold 5,226 BTC in July and August, generating $320.7 million to support the reserve and fund STRC repurchases.

STRC rose above $90 for the first time since mid-June, signaling an improvement in its market performance following Strategy's approach.

However, K33 warned that Strategy's underlying capital-allocation model remains vulnerable during Bitcoin downturns. The firm added that demand for Strategy's securities tends to be strongest when BTC is already performing well. This encourages the company to raise capital and buy Bitcoin near market highs. During weaker periods, it may instead need to sell BTC to support MSTR or STRC.

"That is a deeply unfavorable capital-allocation cycle and a recipe for terrible average entry and exit prices," K33 added.

BTC is trading at $64,170, up 1% in the past 24 hours at the time of writing.