Concerns Over Bitcoin Theft Lead Some to Convert BTC to ETFs

The recent theft of $100 million from the supply chain of hardware wallet Ledger has stirred significant controversy, leading Southeast Asian distributor CryptoBilis to halt all sales and shipments. In addition to concerns about Ledger's subsequent compensation, the community has begun discussing the age-old question: how to better protect one's assets.

Hardware wallets were previously considered the standard solution, as the motto "you hold the private keys, you own the assets" has long been a principle in the cryptocurrency industry. However, with the ongoing issues surrounding hardware wallets, user confidence has significantly diminished, prompting a search for alternative methods to alleviate this anxiety.

The simplest option is to store assets on trading platforms, as mainstream platforms theoretically have the capacity to compensate users. However, the FTX incident continues to be a point of reference for many.

Some users resort to offline devices, such as iPhones, restoring them to factory settings, installing the necessary applications, enabling airplane mode, and then never connecting to the internet again, while also turning off Bluetooth and NFC. Signing transactions relies on two phones scanning QR codes, which is an old method but can be somewhat cumbersome.

Recently, a new method has been proposed that is quite interesting and has not been seen in previous years, as the product has only emerged in the last two years: buying ETFs, such as BlackRock's IBIT.

Why IBIT Can Be Considered a Method for Storing Bitcoin

As of October 9, iShares reported that IBIT holds 805,000 Bitcoins, with a market value of approximately $66.7 billion and a net asset value of about $66.3 billion.

Let's take a look at the structure of IBIT.

This is a statutory trust. The custodian is Coinbase. The Coinbase Custody Trust Company keeps all private keys for the trust's Bitcoin in cold storage within a Vault Balance. The daily operations of the fund are managed by the trustee, while the initiator oversees the overall management and instructs the custodian to move Bitcoin from the Vault Balance to the trading balance during redemptions or fee payments. BlackRock does not hold the private keys.

In this entire process, only Coinbase has the private keys. Choosing IBIT largely means choosing to trust that Coinbase Custody will remain secure, that BlackRock will operate normally, that your broker will properly hold your shares, and that this trust and regulatory framework is sound.

In other words, compared to trusting oneself, choosing IBIT reflects greater trust in the judgment of institutions managing vast amounts of capital. After all, they have managed $15 trillion without incident.

Another point is liquidity. The liquidity of ETFs is noticeably lower.

When you buy and sell IBIT in your brokerage account, transactions are matched in the stock market, and nothing happens on-chain. Bitcoin only truly moves when the fund's overall net holdings need to change; subscriptions and redemptions are settled through internal accounting at Coinbase Prime, not counted as on-chain transfers. Bitcoin only goes on-chain when the trust's trading balance is swept into the custodian's cold storage, executed in bulk at the end of the day.

Even during favorable Bitcoin market conditions, the number of transactions at the ETF's custodian address is quite low. On June 2, 2025, 4,113 Bitcoins, worth approximately $429.4 million, were transferred, broken down into multiple transactions of around 300 Bitcoins each, totaling only a few dozen transactions completed in two hours.

In contrast, trading platforms certainly do not operate at this frequency, with thousands of transactions occurring daily.

The lower the trading frequency, the greater the relative security. This is indeed where ETFs have an advantage.

So, who do you choose to trust?

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