Yesterday, over $6 billion was stolen from a Binance hot wallet. Measured in dollars, that makes it the largest theft in the history of humanity.
Let’s be clear about what this says about Bitcoin itself: nothing. The protocol worked exactly as designed. What it does say is that every Bitcoin custody solution has trade-offs. Earlier this year self-custody was in the hot seat after an entropy bug was discovered in the Coldcard hardware wallet. Now the largest and ostensibly most secure crypto exchange in the world has shown it isn’t 100% safe either. So the obvious question is, what is? How should you hold Bitcoin for the long term?
Starting with the one rule that applies to everyone: Don’t keep all of your Bitcoin in one place.
Whether you self-custody or use a custodian, your holdings should be distributed across multiple setups. At this point it is illogical to have all of your eggs in a single basket, no matter how secure you think that basket is.
That’s practical wisdom, but it still doesn’t tell you where or how to hold your coins. Right now there are three options that make sense:
Option 1: Multi-vendor, multi-sig self-custody
This is the most technical option, and also the most secure and most sovereign. You create one vault that requires multiple private keys to spend from, and each key is generated on a separate offline device. That could be three dedicated Bitcoin signing devices, say a Ledger, a Trezor, and a Blockstream Jade. It could be three air-gapped laptops running Bitcoin Core, a Dell, a Lenovo, and a MacBook. Or it could be a mix, with one key from a MacBook, one from a Passport, and one from a Dell. The point is that every key comes from a different device running a different operating system, so a flaw in any single manufacturer’s entropy can’t compromise the whole wallet, and you still get the security of multi-sig.
You still have to protect the keys and the vault configuration, and everything should be geographically separated so there is no single location where a bad actor could access the full setup. This is the gold standard, but it comes with real practical and technical demands. Not everyone will want to do this or feel properly equipped to, and that matters, because the most important thing is simply not losing your Bitcoin. A setup that exceeds your technical capabilities is itself a way to lose it.
Our friends at The Bitcoin Way put together a self-custody guide which covers everything you need to know. Download the free guide to learn how you can secure your Bitcoin stack safely and sovereignly.
Option 2: Collaborative or multi-institution custody
A multi-sig vault where each private key is held by a different independent entity. Unchained, Casa, Onramp, or The Bitcoin Advisor to name a few. Each provider offers collaborative custody along similar lines, where you hold two keys and a third party holds one, or where you hold none and three distinct institutions each hold their own. For most people this strikes a strong balance between security and usability.
Option 3: A Bitcoin ETF
Here a traditional financial institution operating under U.S. law and regulatory oversight holds Bitcoin on behalf of shareholders. An ETF custodian is not immune to problems, but their cold storage, checks and balances, and compliance requirements are far more robust than anything an offshore crypto exchange like Binance is working with.
What this means for the market
Bitcoin is down roughly 5% over the past day in the wake of the news, but it is approaching our most important support level.
Short-term holder realized price has historically marked the transition from bear market to bull market. Bitcoin reclaimed this level about two months ago, which is why we view the current structure as an uptrend, and it should now act as support. If price holds above $75,000 through the weekend, we expect a rebound and a push into the $80,000s following next week’s midterm elections.
Bitcoin has performed well after each of the last three elections, averaging a return of roughly 70% over the following 90 days. Once the vote is behind us, election uncertainty leaves the market, and that has consistently been good for risk assets. It’s worth remembering too that Bitcoin printed a local bottom earlier this year right around the Coldcard scare. A major custody FUD event colliding with a clear catalyst on the calendar has a familiar look to it.
Post-election Bitcoin rally’s haven’t been limited to a quarter either. The average 1-year return after each of the last 3 elections: +165%.
Equities also tend to perform strong during post-midterm years. When breaking down each 4-year election cycle into single years (Presidential, Post-Presidential, Mid-Term, Post Mid-Term), the “Post Mid-Term” / “Pre Presidential” year has the highest average return for the S&P 500: ~14%.
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