Digital Asset News host Rob discusses a Bitcoin cold storage hack and related crypto security concerns
Solo presenter Rob from Digital Asset News covers a Cold Card hardware wallet security breach, a hedge fund blowup, and the US debt ceiling debate.
Summary
Rob from Digital Asset News opens with news that 589 Bitcoin were stolen through a vulnerability in older firmware versions of the Coldcard hardware wallet, specifically affecting MK2 and MK3 devices. He argues that even a single cold storage failure is a significant blow to the foundational "not your keys, not your crypto" principle, and raises broader questions about whether hardware wallets are truly safer than exchange-held or ETF-based custody. He notes that anyone who has "orange-pilled" friends or family into crypto bears personal responsibility for setting them up safely, and shares that his own MetaMask wallet was drained in a recent incident despite his caution.
Rob then delivers an extended segment on using a Roth IRA for crypto holdings, citing Peter Thiel's $5 billion tax-free PayPal windfall as a model, and quoting IRS guidance confirming that staking rewards earned within a Roth IRA are tax-free on qualified distribution.
He then covers the rapid collapse of Leopold Aschenbrenner's AI-focused hedge fund, Situational Awareness, which was up 439% before being wiped out by margin calls — a sequence Rob connects to a Bloomberg report that Citadel Securities called for a surprise Fed rate hike that he suggests may have been strategically motivated. Finally, Rob notes that Senator Elizabeth Warren has publicly agreed with Donald Trump on eliminating the US debt ceiling, which Rob interprets as bullish for hard assets like Bitcoin, even while describing it as damaging for the broader economy.
Key Takeaways
FULL TRANSCRIPT
The Cold Card Hardware Wallet Hack
Rob: Well, everybody, this is the video I thought I would never have to make. It looks like a cold storage device has failed us. It looks like 589 Bitcoin have been hacked — seized, confiscated by hackers — as they got into a cold storage device called Cold Card.
The information around it has now been made public. Last night there were a lot of rumblings and rumors about a loss of Bitcoin and what had actually happened. It looks like it comes down to an old version of this cold storage device called Cold Card. If you've never heard of that device, don't feel bad — neither had I. This looks like a calculator I might have used in seventh grade, but apparently it was being sold at various iterations. Because of the firmware — MK5, MK4, MK3, MK2 — if you had bought this years ago and used the device on MK2 or MK3, and you had generated a cold storage key or a mnemonic phrase, you are at risk right now.
From what I understand, if you upgrade right now there will be no problems. However, if it's me, how can you trust that? Because I think if you're like me and you heard about this, the first thing you probably did was check your device — which all of you should have some kind of cold storage device. And some of you are probably thinking to yourself, "Why would I need a cold storage device if they're going to fail just like that?"
Why This Is a Big Deal for Cold Storage Trust
This is something that was uncovered years later. And I have to tell you, for the normies out there, some people will say, "Well, this is no big deal, Rob. They patched it, it wasn't an issue, they moved forward. This happens all the time." No. I mean, these things do happen all the time, but cold storage devices are supposed to be the gold standard. And what do the maxis say? Not your keys, not your crypto.
So when you see this, and you do everything right — you don't take the lazy route by keeping it on an exchange or doing an ETF, you do everything perfectly — and then you lose all your Bitcoin. To me, this is a huge failure. I understand the things going on behind the scenes, and they're saying, "We've nipped this in the bud, it's no big deal." But I look at this as a very big loss of trust moving forward, because it's not just the company Cold Card itself. It is all cold storage devices.
Of course, different cold storage devices will say, "Look, we've never been hacked. Tangem's never been hacked. Ledger's never been hacked" — personal data aside. So when this happens and comes out, you're thinking: when's the next shoe to drop?
And I've got to tell you, sometimes I think about that phrase — not your keys, not your crypto — and I think to myself, maybe it wouldn't be a bad idea just to do ETFs and have them hold it in their cold storage, and hopefully they do it the right way.
What Caused the Vulnerability
To rewind: why did this happen? Apparently the way that mnemonic phrases — the 12 or 24 words — are actually generated, there is a very rigorous way to do that which produces very random results, or you can do a kind of shortcut version, which is apparently what Cold Card had done before. Now, people say, "It wasn't lazy, Rob. They just did it this specific way and then it became hackable." What do you want me to tell you? It's security, and if they had done this a little bit differently, maybe we wouldn't be here.
So, if you own a Cold Card and you're on a version before MK4, you are at risk. What I would personally do is drop Cold Card and go for another device. If you want to update it, go to their website — it's coldcard.com. But this just makes me think about what we've been talking about: it's not how much you make, it's how much you keep.
Imagine if you were somebody who had bought Bitcoin at $1,000, $3,000, $5,000 — or below $1,000 — and you used a Cold Card and then it's all gone. You're like, "Wow, all that discipline and diamond-handing for nothing." So I want you to remember that the next bull cycle we go through, when you're thinking to yourself, "Nah, I'm just going to keep holding." There's something to be said for taking profits, because nobody ever went broke taking profits.
Custody Alternatives and Responsibility to Others
The alternatives I use are Tangem and IT Trust — I use IT Trust for a premium custody account. And like I said, if you've orange-pilled someone, you are responsible for those people from now on. It would be pretty devastating — not necessarily a Cold Card thing, but what about all the things that happen with phishing attacks, with all the emails out there, with all the different things from exchanges that look legitimate but are not, faulty emails, faulty scams, everything else? You're responsible for these people — whether that be your family or your friends — whoever you've orange-pilled. Because if they lose everything, they're not going to be blaming Cold Card. They're going to be blaming you.
So set them up with something easy. Get them into an ETF. I know it's crazy to think about that, but that just seems like — and we've talked about this before — if you want to do an ETF, do an ETF. Or you can put it in a premium custody account with IT Trust. Or you can do a Ledger or a Tangem, my favorite.
The Roth IRA Angle for Crypto Investors
Now, if you're thinking about custody and you want to go even further down the route and say, "I want custody, but I don't want to pay taxes" — do what Peter Thiel did. You know how Peter Thiel made $5 billion tax-free? He put his PayPal shares into a Roth IRA when they weren't worth anything, and then all he had to do was wait until he was 59 and a half years old, and he was able to take it out tax-free. So when you're doing these things with crypto, if you think it's going to go up, why not do that? Zero capital gains. You can trade within your account.
And I sometimes forget to talk about the crypto you have in your Roth IRA — you can stake it, and the rewards you get aren't taxable. You can stake Ethereum, you can stake Solana. You buy it, you stake it, you earn it. And the question is: what about taxes? Right from the IRS website: are staking rewards taxable within my account? Staking rewards earned within an IRA account generally grow tax-advantaged, meaning they are not taxed until distribution for traditional IRAs, or are tax-free upon qualified distributions for Roth IRAs. Depending on your type, talk to your financial advisor.
The Federal Reserve Decision and the Aschenbrenner Hedge Fund Blowup
Now, I couldn't quite understand why this next story was going around. The Federal Reserve came out and kept rates exactly the same. Most everybody — about 66% of people — were under the impression that was going to happen, and it did. But one of the major corporations for trading and assets under management, Citadel Securities, had said no — they were going to raise rates on Wednesday. Well, they didn't.
I was trying to figure out: was that just some boisterous thing they came out with, saying they knew what was going to happen? I guess not, but there's a reason for everything.
So this is Leopold Aschenbrenner. He's a former OpenAI employee, and he was the darling of the AI bull run as a young kid. He put a lot of money into AI stocks, into energy like Bloom Energy, and did a lot of different things with storage like SK Hynix. He was making massive returns on his hedge fund. From Bull Theory: the best-performing fund of 2026 just got wiped out. Citadel buys Situational Awareness — that is the hedge fund — after a big loss. Here's what happened.
And I've got to tip my hat to Citadel. This is why I don't trade on leverage.
Leopold Aschenbrenner's Situational Awareness just had one of the fastest blowups in hedge fund history. Up 439% this year — pretty good, my Bitcoin's down over 40% — on aggressive AI bets. It hit $45 billion in assets. Here's what he went long on: hardware like SK Hynix, the chip maker, and shorted software stocks like Adobe. Chips up, software down. He borrowed roughly 4x his capital to size the bets up. Again — loans, leverage, have fun. Not doing that. Leverage is great when you're right, but it burns you when you're wrong.
The timeline of events: on July 28th, Bloomberg reported that Citadel Securities was calling for a surprise Fed rate hike — a move markets hadn't priced in. Panic hit. AI stocks fell 30%, and they fell even harder because people believe in Citadel. But they just put it out there for a specific reason. Then on July 30th, all three of Aschenbrenner's prime brokers — Bank of America, Goldman Sachs, and JP Morgan — issued margin calls on the same morning. And when you get margin-called, it's either put up or shut up, or they're going to liquidate you. Same day, the Wall Street Journal reported that Ken Griffin's Citadel had bought Aschenbrenner's entire stock portfolio, reportedly at a steep discount.
You know, there's always people saying the next Warren Buffett is right around the corner. As I understand it, he's trying to raise more funds. We'll see how that plays out. But it doesn't look good. And that's what happens when you get a little too greedy. What's the term? Pigs get fed and hogs get slaughtered.
Elizabeth Warren Agrees with Trump on the Debt Ceiling
And then lastly, a little glimmer of hope from everybody's favorite senator, Elizabeth Warren. Now, hear me out — this is actually good for our bags. Really bad for the country, I think.
She states: "Donald Trump is right. Eliminate the debt limit. Its only real function is to threaten an economic crisis. I'm ready to work with both Democratic and Republican senators to immediately scrap the debt ceiling and protect the economy."
When I first saw this, I thought, "This has got to be a hacked account." But apparently it was real.
For me, eliminating the debt ceiling means: just keep printing, baby. Just keep printing away. No problems. Just rack it all up. We can keep going because we're the world reserve currency and we're the United States. Don't pay attention to how much debt we're in — we'll fix that later. So if Elizabeth Warren wants to do it, sounds like a great plan. Pretty awful for the country, but pretty great for the portfolio. And that's why you should probably look to hard assets.
Viewer Q&A
Rob: Hi Rob — someone says they're changing one of my rules to 100% exchanges. It's weird, right? I was talking to a friend of mine today and we were talking about this hack that happened with Cold Card. He said, "This is why I leave everything on exchanges." I was like, "You do?" He's been in crypto longer than I have. He said, "Yeah. I don't think we're going to have another Voyager, Celsius, or FTX." He goes, "I just leave it on there." And I'm like, "Seems kind of risky." He's like, "Yeah, but you know what was really risky? Putting it in a cold wallet." He got me on that one.
Jimmy says that's not Cutie — that is a random dog I found on the street here in Texas. Almost got hit by a car, so I had to take her in. Now I'm just trying to find her a home, because what are you going to do — let a dog get hit?
Add User asks: "Hey Rob, will the ITC conference be live-streamed on YouTube?" Yes, that's all I know. I think the whole thing will be streamed. You can either come in person or watch it right there. It is in Miami, and not a bad place to be, especially in November if you're in the Midwest — you deserve a vacation.
Mattio says: "What's the point of cold storage?" Now, to be fair, this hasn't happened for all cold storage devices. But it just takes one. It just takes one for people to lose faith in the whole idea — the whole thought process of cold storage devices, not your keys, not your crypto. Treat all exchanges like a gas station bathroom: get in, do your business, get out, keep everything on you. And now you do all that and you get hacked. What the hell? What do I have to do?
Chuck asks: "So what was the cold storage device that did this major failure?" Chuck, it was called Cold Card. Their website is coldcard.com. But yeah, this thing looked like a calculator from when I was in seventh grade. I'm sure it's awesome — people say, "Cold Card's the best." Well, I don't know if anybody's going to want to be buying this anytime soon. What an awful thing for the business. But you know what's even worse? The 589 Bitcoin that got taken. Just gone, from a cold storage device.
And I know some of you out there have had your cold storage devices drained, or your crypto accounts drained, or your exchange accounts drained, or your hot wallets drained. It is the worst feeling. This actually happened to me a couple of months ago — my MetaMask, which I didn't have much in, somehow somebody got access to it and drained it. I was damned. And I'm pretty paranoid, so there's only so much you can do.
Someone says: "100% — I trust Uncle Larry more than myself." ETFs, you know. I remember Plan B came out and talked about how he had put everything into an ETF. He said, "Sorry." Plan B is one of the big OG Bitcoin investors from a long time ago, and everybody gave him a lot of guff, a lot of pushback. He said, "That's what I want to do. I think it's safer this way." And I'll be damned if he wasn't right — at least for that particular reason.
Someone else says: "Hackers will always figure out a way. We just have to be careful. Wasn't Bybit hacked for $1.5 billion?" Yes. On February 1st, 2025, the Dubai-based crypto exchange Bybit suffered a historic $1.5 billion hack, marked as the single largest crypto heist of all time. It targeted Bybit's Ethereum multi-sig cold wallet, resulting in the theft of 450,000 Ether. That was February 2025 — it's probably worth a lot more now. So there you go. You're damned if you do, you're damned if you don't.
We're all on a time frame here. And this is why I diversify. I know people will say that's crazy — "Why would you buy real estate or stocks? Just put it all in Bitcoin." Bitcoin's great and probably will do fantastic, but we've got a lot of doubts and a lot of issues. And I know I don't want to bring up the Q-word — quantum computing. That's another issue.
Someone says: "Micro Strategy doesn't get hacked." Well, Micro Strategy is using Coinbase Prime, so as long as Coinbase Prime doesn't get hacked. Darren says: "Buy spot ETFs." And Darren's right — not your crypto, not your problem. I'm going to have to screenshot that.
Someone says: "Everything has a weakness." Very true. Someone else says: "I think AI and quantum will help build security eventually." Very true.
And Absy says: "This is way blown out of proportion. Bank scams are way more prevalent. Don't see anyone taking money out of the bank, so stop with this nonsense."
Well, Absy, you could say it like that. But as far as bank scams go, there are massively more trillions of dollars floating around in the banking system than there are in the crypto ecosystem. And 589 Bitcoin lost is not that much Bitcoin. That's not the issue. It's not the amount. It's not the frequency. It's that this was never supposed to happen. And once this happens the first time, you can never again say that cold storage is 100% effective. You can't say that anymore. Now you have to say, "Well, only this one time." And that is not good for trust.
The normies were already thinking this doesn't make much sense — "internet nerd money," why would I get into this? And then they heard about FTX, Voyager, and Celsius, and everything collapsed. And now there's a cold storage device — they don't even know what that is — and they hacked out of there. So you're telling me I should invest in that so I can lose it and scammers can scam me? That, I think, is the bigger issue. It's not the frequency. It's not the amount. It happened, and we have to keep going forward with that.
And look on the bright side — the price of Bitcoin will probably go lower, so we can scoop it up even cheaper.