3 min de lectureRecently, a prominent Bitcoin investor, known by the pseudonym 100TrillionUSD, announced on X (formerly Twitter) that he had transferred his Bitcoin holdings to ETFs. This decision sparked intense criticism and even insults from self-proclaimed Bitcoin maximalists.
However, his move came on the heels of the kidnapping of Ledger’s founder (previously discussed), which many consider a valid reason to reassess self-custody. Should dogmatic adherence to self-custody compromise personal safety?
The custody conundrum: are we getting it right?
Custody remains a significant concern, particularly when major exchanges handle it inadequately. Just last week, Dubai-based derivatives exchange Bybit reported a $1.4 billion hack, confirmed by the FBI to have been perpetrated by the North Korean hacking group Lazarus. Despite processing billions in daily trading volume, Bybit’s custody solution relies on Safe, an open-source, multi-signature smart contract wallet available to anyone. Given the crypto industry’s maturity, it should have learned from past failures. One crucial lesson is that platforms have a fiduciary duty to protect customer funds, yet many fail to uphold this responsibility.
Fortunately, thanks to Bybit’s substantial proprietary reserves, customers did not lose any assets in the hack. However, the stolen digital assets worth $1.4 billion are now being offloaded into the open market by North Koreans. Is this acceptable? Moreover, it has been confirmed that mainstream platforms are still using retail-level solutions to custody customer funds. This industry is not operating with the expected level of stewardship. Cutting corners on security is unacceptable, and customer funds should never be put at risk.
In this context, I reiterate that ETFs and ETPs are proving to be a rational long term investment solution. While some still espouse the mantra “not your keys, not your coins,” the truth is that self-custody is not suitable for everyone. CoinShares Physical ETPs are 100% physically backed by the relevant underlying coins. For each investment in an ETP, the very same amount is bought in crypto and stored with one of our institutional-grade custodians like Komainu, that CoinShares co-created with Ledger and Nomura as early as 2018.
Being a “coin” maximalist does not necessitate rejecting third-party custody outright.
Even Hal Finney, one of Bitcoin’s earliest pioneers, acknowledged this. On December 30, 2010, he wrote: “There is a very good reason for Bitcoin-backed banks to exist, issuing their own digital cash currency, redeemable for bitcoins.”
He also predicted that:
“Most Bitcoin transactions will occur between banks, to settle net transfers. Bitcoin transactions by private individuals will be as rare as… well, as Bitcoin-based purchases are today.” (At the time, Bitcoin purchases were virtually nonexistent).
Would anyone dare to say that Hal Finney was not a true Bitcoin maximalist? Many will recall Wences Casares, the founder of Xapo, now operating as a crypto bank in Gibraltar. Beyond orange pilling many of us, Wences embraced the concept of third-party custody as early as 2013.
This Bybit hack occurred while the crypto market is already under pressure from an equity market sell-off, combined with uncertainty around tariff implications and all eyes being fixated on 10-year treasury price action.
The bigger picture: remaining optimistic
The market is not bullish enough, and we are certainly impatient. Many expected a U.S. Bitcoin reserve from day one. While that has not happened yet, the idea of a U.S. Sovereign Wealth Fund should not be overlooked.
Moreover, the SEC’s new leadership is signaling a major shift, dropping cases against crypto companies. This week, it was almost a case a day (CoinBase, Metamask, Consensys, Gemini)
The U.S. has managed to become the crypto epicenter despite maximum pressure from various government agencies. Imagine what will happen if all forces, public and private, work together to create the perfect conditions for innovation and leadership around crypto… It is hard not to be optimistic about the future.
