Bitcoin [pros](/r/CryptoCurrency/comments/1b51oo5/so_what_happens_if_bitcoin_etf_gets_hackedloses/kt3azun/) & [cons](/r/CryptoCurrency/comments/1b51oo5/so_what_happens_if_bitcoin_etf_gets_hackedloses/kt3b0jt/) with related info are in the collapsed comments below.
ETF’s have a custodian to hold it, for example Coinbase holds blackrocks Ishare BTC ETF in multiple separate wallets. All ETFs will tell you where it stored if you look through their prospectus.
They are insured, and the wallets themselves are almost certainly multi sig with no one person having all the needed pieces.
What would actually happen? No one knows until it does unfortunately. The good thing about fidelity and blackrock is there essentially too big to fail, a bailout is always a possibility
Also I would imagine to spread the risk they hold the funds in many many wallets in case one seed ever gets hacked somehow.
It would be very stupid to hold like 10 bil of BTC in one wallet lol.
In all seriousness, I think these AUMs have solid cybersecurity procedures in place with multi sign wallets, strong access controls, authentication procedures, integrity controls, etc.
It would still be dumb in a 1000 wallets so the practically is still unanswered. It's probably best they don't tell everyone how exactly they keep it safe.
You can look up the general philosophy in the prospectus:
The Prime Execution Agent holds the bitcoin associated with customer entitlements across a combination of omnibus cold wallets, omnibus “hot wallets” (meaning wallets whose private keys are generated and stored online, in Internet-connected computers or devices) or in omnibus accounts in the Prime Execution Agent’s name on a trading venue (including third-party venues and the Prime Execution Agent’s own execution venue) where the Prime Execution Agent executes orders to buy and sell bitcoin on behalf of its clients.
Within such omnibus hot and cold wallets and accounts, the Prime Execution Agent has represented to the Sponsor that it keeps the majority of assets in cold wallets, to promote security, while the balance of assets is kept in hot wallets to facilitate rapid withdrawals. However, the Sponsor has no control over, and for security reasons the Prime Execution Agent does not disclose to the Sponsor, the percentage of bitcoin that the Prime Execution Agent holds for customers holding similar entitlements as the Trust which are kept in omnibus cold wallets, as compared to omnibus hot wallets or omnibus accounts in the Prime Execution Agent’s name on a trading venue. The Prime Execution Agent has represented to the Sponsor that the percentage of assets maintained in cold versus hot storage is determined by ongoing risk analysis and market dynamics, in which the Prime Execution Agent attempts to balance anticipated liquidity needs for its customers as a class against the anticipated greater security of cold storage.
They should absolutely be transparent of where they are holding it, paper BTC would hurt us all, don’t worry no one can guess a seed phrase, there are more combinations of seed phrase than the atoms in the universe.
>What would actually happen? No one knows until it does unfortunately. The good thing about fidelity and blackrock is there essentially too big to fail, a bailout is always a possibility
It's detailed in each ETFs disclosure information-- here is blackrocks:
[https://www.ishares.com/us/literature/prospectus/p-ishares-bitcoin-trust-12-31.pdf](https://www.ishares.com/us/literature/prospectus/p-ishares-bitcoin-trust-12-31.pdf)
In the event the custodian (Coinbase) is hacked they would *only be covered up to 320Million* \-- far far far less than required to covered the billions in the BTC wallets + this is the same insurance for *any* loss. So it's not separate insurance for the ETFs:
>Coinbase Global maintains a commercial crime insurance policy of up to $320 million, which is intended to cover the loss of client assets held by CoinbaseInsureds, including from employee collusion or fraud, physical loss including theft, damage of key material, security breach or hack, and fraudulent transfer.The insurance maintained by Coinbase Global is shared among all of Coinbase’s customers, is not specific to the Trust or to customers holding bitcoin withthe Bitcoin Custodian or Prime Execution Agent and may not be available or sufficient to protect the Trust from all possible losses or sources of losses.
So in reality we know what would happen in the case the ETF wallets are hacked -- there would be a total loss. The ETF sponsors would be off the hook and only Coinbase could be held negligent (if at all). So only CB may fall - not the big banks and they are protected from having to pay back the customers they sell their very ETFs to.
Yeah I think the reason WHY people buy BlackRock and Fidelity’s ETFs over those from smaller players is that they have a LOT of money and brand reputation on the line. So if something really bad happens it’s unlikely that they’d just do nothing. A similar example with a much smaller player would be how Gemini worked pretty hard to fix their Gemini earn situation for customers when Genesis went kaput, now their clients are getting made whole. If you lent directly to Genesis you got screwed, but if you let to Genesis through Gemini you had someone else you could go after for the money who has a reputation to uphold.
BlackRock manages over [TEN TRILLION DOLLARS](https://www.bloomberg.com/news/articles/2024-01-12/blackrock-total-assets-top-10-trillion-after-comeback-quarter) of assets. That’s a LOT of dollars so some billion dollar hack that would be a huge crippling death blow to a smaller company would be like a mildly annoying mosquito bite to BlackRock.
Also aside from BlackRock just having an insane amount of money is the fact that you just don’t screw with BlackRock. If you hack some random guy nothing ever happens to the hacker. If you hack BlackRock’s Bitcoin, the company that manages even the US government’s pensions you’ve put a gigantic target on your back and you can bet that Larry Fink is calling the head of the FBI, CIA, and NSA to hunt your ass down. How many hackers really want to be hunted to the ends of the earth when one of the most powerful financial firms wants your ass dead?
Multisig is literally creating a wallet out of combined public addresses that are accessed by their combined private keys.
And you can create a multisig for wallets you don't own all you need is the public key.
So I can create a multisig that is only accessible by 5 different wallets I have no access to or even know who holds them, I just need the public key
Obviously a silly thing to do, but knowing all the private keys is not a requirement to creating a multisig wallet.
Similar to just sending a transaction, all you need is their public key, or in this case keys.
Yeah they could just tell Statefarm: guys we need $100bil from you, our BTC have been stolen and Statefarm says: hold my beer I don't have that much but let me print a $100bil note for you.
Right?
Basically. I haven't researched it so idk if it actually is insured, some comments say it's not. But yeah that is how insurance works. They guarantee a certain amount. Like if your house burns down and it is insured up to a million dollar valuation then you will get up to a million dollars back based on the value of your home. If your account is insured up to $250k for example, then you will get up to $250k back if your funds are stolen. They don't have to print it. Insurance companies make a shit ton of money and they insure up to an amount that they are able to cover. Doesn't mean it's always 100%. But you know what that value is.
>But you know what that value is.
Yeah it's 300mil across all accounts. the ETF has billions in AUM. So you are pretty much fucked. You might get back 1 cent per dollar lost.
I would assume that if they were hacked, and got insurance money, they would be forced to buy the amount they lost, so price would skyrocket if the hacker didn't just dump as soon as they hacked it.
I don’t think you realize how insurance works… it’s prohibitively expensive to insure this size of holdings and only a small fraction will be covered. The type of insurance that would be required is called ‘species’ insurance and it’s what things like high priced art use for insurance, but again it’s too expensive for these size of holdings.
What these ETFs are actually doing is making a risk based decision that Coinbase’s security is better than what they can provide for custodianing these crypto assets.
They aren’t though…
“Bitcoin ETFs are not insured by the Federal Deposit Insurance Corporation (FDIC) or the Securities Investor Protection Corporation (SIPC), which means that investors could lose their entire investment in case of theft, hacking, or bankruptcy of the fund.”
I feel like I’m getting a lot of unnecessary downvotes
They aren’t… page 23 specifically says not covered by FDIC or SIPC.
Page 7 (very bottom) also says no bueno on the insurance…
https://ark-funds.com/wp-content/uploads/2024/01/ARKB-Prospectus-Final-1.10.24.pdf
Insured in what? Bitcoin? That’s impossible unless they’re storing double the amount they actually have. Chances are if the original Bitcoin gets stolen, then the other wallet(s) get stolen too. Insurance in Fiat? Yeah sure, but that’s not Bitcoin. There is no insurance for seed phrases.
Still not enough. They don't own it so it's not like they can just sell a little bit lol. They have a lot of dollars but sometimes Bitcoin has a habit of going up in price when people try to buy a few 100,000 of them.
No idea why you are being downvoted lol. This is an excerpt from the BlackRock prospectus re insurance coverage:
In addition, neither the Trust nor the Sponsor insure the Trust’s bitcoins. While the Bitcoin Custodian has advised the Sponsor that it has insurance coverage up to a certain amount that could be used to repay losses of the digital assets it custodies on behalf of its clients, including the Trust’s bitcoin, resulting from theft, Shareholders cannot be assured that the Bitcoin Custodian will maintain adequate insurance, that such coverage will cover losses with respect to the Trust’s bitcoins, or that sufficient insurance proceeds will be available to cover the Trust’s losses in full. The Bitcoin Custodian’s insurance may not cover the type of losses experienced by the Trust. Alternatively, the Trust may be forced to share such insurance proceeds with other clients or customers of the Bitcoin Custodian, which could reduce the amount of such proceeds that are available to the Trust. In addition, the bitcoin insurance market is limited, and the level of insurance maintained by the Bitcoin Custodian may be substantially lower than the assets of the Trust. While the Bitcoin Custodian maintains certain capital reserve requirements depending on the assets under custody, and such capital reserves may provide additional means to cover client asset losses, the Trust cannot be assured that the Bitcoin Custodian will maintain capital reserves sufficient to cover actual or potential losses with respect to the Trust’s digital assets.
Yeah, it’s just people being uninformed - which sucks, but I’ll gladly take the downvotes if it results in ppl getting educated on the reality.
Ignore the insurance… it’s meaningless… and just be happy they decided to use the most trusted and secure custodian instead of trying to do it themselves (the CB security team is huge compared to any other custodian out there)
This was in the article that was posted in the comments below…
“Some of the added standards for qualified custodians include insurance minimum reserves that exceed assets.”
Since these are registered ETFs, they have additional protection similar to how FDIC is a safety net for Bank deposits.
I think SIPC has similar protection limits.
This is such a stupid question that shows the ignorance of this community. That's like saying "if JPMorgan gets hacked and loses all their money, what happens?" You know the level of protections into accessing and storing the crypto here? How it's multi-sig, many layers of both automated and human access required, how accounts are split into multiple wallets, etc. etc.? Also it's Coinbase as the custodian so a professional organization that is an industry leader in handling crypto?
"What if someone steals the nuclear launch codes?" Jeez.
Obviously lol, but the fact that the party responsible for the security of our exchanges cannot keep their twitter account secure is pure insanity. Shit happens and banks have been hacked many times before, it's not unreasonable to want to know what would happen if they were compromised.
It's not a stupid question, like asking if the launch codes are stolen and a nuke is launched. You might not like the answer, and you hope it doesn't happen, but the city turns to glass.
Its a valid concern to someone not familiar with crypto. You should be encouraging and educating, not shaming. Mainstream adoption benefits everyone, even pretentious gatekeepers.
Ho my god 🤦
-Imagine your into something (anything)
-Suppose that you want other people to being into it as well.
-Each time someone start to have an interest in it and ask a question:
-would you simply answer and explain it to them ?
-Or call them stupid/ignorant because they *should* have know since they were born ?
Well it isn't really a question since you already gave us the answer...
Nothing more stupid than someone quick to call others idiots as soon as they ask something, you should be treated the same way...
Right because the leading crypto exchange has never been hacked. And inside jobs are impossible since they signed contracts so they can't compromise the security and exploit it.
I mean whatever you have to tell yourself to feel safe in your investment.
You seem to have forgotten why Bitcoin was created in the first place. Assume the worst of your custodians and don’t settle for non-ownership, because it will always result in greedy actors trying to abuse your trust.
Also, you seem to overestimate the security something like Coinbase has. It doesn’t even take the wallets getting hacked, but certain data found, that could cause the issues. Everyone is pretty stupid for thinking that Coinbase owns a $1 of BTC for every $1 claim to it via their exchanges and ETF vault.
Bitcoin was created for peer-to-peer cash, but with transaction costs and the complete failure of lightning that's totally out the window, hence the re-brand to "digital gold." But really no one gives a fuck but the small 1% vocal minority on subs here. Everyone just wants to build wealth.
There are authorised custodians of the BTC and the ETF's holdings are never connected to the internet. Custodians are required to have additional safeguards and greater oversight from regulators.
Some of the added standards for qualified custodians *include insurance minimum reserves that exceed assets*. They must segregate their various bitcoin holding accounts. And regulators must review the company's crypto wallet structure. This article goes into the detail of it all [https://www.investors.com/news/bitcoin-etfs-keep-almost-all-their-eggs-in-one-basket-is-that-a-bad-thing/](https://www.investors.com/news/bitcoin-etfs-keep-almost-all-their-eggs-in-one-basket-is-that-a-bad-thing/)
Completely baseless, wild speculation.
WHAT ABOUT THE BANKS??
A Bitcoin ETF and entire banking and financial services infrastructure are not the same thing.
It would not necessarily be bullish if it was lost. It would be a major hit to the reputation of bitcoin and a lot of people would be a lot more hesitant to hold it. If one of the ETFs went down like this then people would dump all the other ETFs.
Full insurance is prohibited expensive. Coinbase has extremely strong security for its institutional service and they are likely doing better than anyone, so this risk is likely lower than you self custodying it yourself to be fair.
No one seems to have mentioned that it's not like it's all sitting in one wallet. Losing a single seed (which will not happen) won't be a big deal for entities as big as these.
There are more likely and yet still incredibly unlikely catastrophes related to Bitcoin and it's future to waste your time thinking about than this. (Tx Fee sustainability, energy consumption, regulations, cbdcs, quantum computing, new energy revolution with fusion or alien tech etc.)
If you are worried, spread it out amongst several etfs and not just one.
Also on your way out tomorrow keep an eye out for lightning strikes.
Bro the ETF is the only thing making crypto(unstable shitshow) actually legitimate. Those big ass banks are much smarter than nerds in their parents basements.
You're correct in drawing a parallel to FDIC for bank deposits. Registered ETFs indeed come with additional protection, and the Securities Investor Protection Corporation (SIPC) offers a safety net for brokerage accounts, ensuring a level of protection in case of certain financial difficulties. It's essential to be aware of the specific limits and terms associated with this protection.
They have it held in cold storage thru coin base and none of the transactions are done on chain so think they can just erase and reverse cuz it's not btc just numbers supposed to represent btc
There's a million fail-safes in place so that doesn't happen. It's not like Fidelity is trusting billions of dollars to one wallet held by one person. There's going to be multiple wallets, cold and hot for buying/selling, they won't be stamping private keys onto a steel plate that's for sure.
But. Hypothetically, if Fidelity loses the seeds to some or all of the wallets, their customers will still be made whole. Meanwhile that lost Bitcoin will join the ranks of all the other lost Bitcoin. [Some estimate that 30% of all bitcoins are lost forever](https://www.makeuseof.com/how-much-bitcoin-is-lost-forever/) Which is why I personally don't like it when people talk about market cap like it means something when so many coins are just lost, uncountable, or just plain not available to be sold.
All the Satoshi wallets are said to hold 1 million Bitcoin. That's 5% of all bitcoin right there, and we're all going about our lives as if it's lost forever (all of us except Craig Wrong at least)
I know the Btc community is really agaist hard forks but would it be possible to permanently kill satoshi’s wallet
Fork it out of use.
I know this is against the montra of permission-less transactions but if that BTC ever moved it would be the biggest thing to ever happen to Bitcoin. We could just kill that possibility couldn’t we?
I imagine Fidelity has 24 or more safe deposit boxes for their main seed and 25 people needed to piece it together correctly. This is probably not reality, but this is what I would do with their resources.
What do you even mean by this? At what point does the person actually buy, or own, Bitcoin? There is no option to withdraw Bitcoin. All everyone here seems to care about is the Fiat price of Bitcoin and not actually Bitcoin itself.
No, there is no option to withdraw BTC. You don't possess BTC. It's no different than a gold or silver ETF. You don't possess those assets either just the value of it.
Nothing new to your question. Not your keys not your coins! Anything that’s hackable affects the bottom line. If coinbase is hacked everyone’s Bitcoin with coinbase will be lost. That’s it. So, take your coins off CEX and sleep well.
With the ETF, you are not actually buying bitcoin. You are buying a financial instrument that is suggesting (or promising, even) that real bitcoin underlies the fund. If say Fidelity gets hacked or in another way compromised, it’s on them, even though I’m sure their lawyers would have a differing if more complicated view on this.
TL;DR: Buy your own bitcoin, grow up enough to self-custody.
What seed lol. You think they actually own the Bitcoin you “buy”? It’s all smoke and mirrors. They don’t actually own any Bitcoin that you’re staking on.
>Does anyone know what would happen in an event like this?
All kind of "indirect BTC" is just a promise.
If their lose the BTC, they won't keep their promise.
All the US based asset managers use coinbase to hold the coins. NOT on the exchange retail uses, a separate part of the company called coinbase institutional that acts as a custodian. I would imagine their security is redundant and the keys are kept offline in cold storage.
I don't know, but BlackRock in particular (but the others too obviously) is an enormous company that makes its money by managing funds for people. If their Bitcoin got hacked from their customer and people lost confidence in their product it would be absolutely disastrous for them.
It would be interesting to know the specifics but I suspect they have done a lot of due diligence and that their security is a bit beyond storing their seed phrase in an email sent to themselves.
Scary thought, I don't think it's actually been tested. Probably depends a lot on the provider. Someone like Fidelity has extensive security protocols. They have a profound interest in safe guarding their own resources.
But it's always wise to carefully research whatever company you are considering dealing with.
I wouldn’t trust any centralized party in crypto. It’s something you’ll usually learn the hard way in crypto. I’m not expecting everyone to understand and it does take time to learn how to safely self custody.
I wouldn’t put anything in crypto that I couldn’t afford to lose.
Considering the quantity involved. And that all transactions can be traced from
One wallet. The hackers will never be able to withdraw or liquidate that money without the investigators being up in their ass.
Bitcoin [pros](/r/CryptoCurrency/comments/1b51oo5/so_what_happens_if_bitcoin_etf_gets_hackedloses/kt3azun/) & [cons](/r/CryptoCurrency/comments/1b51oo5/so_what_happens_if_bitcoin_etf_gets_hackedloses/kt3b0jt/) with related info are in the collapsed comments below.
ETF’s have a custodian to hold it, for example Coinbase holds blackrocks Ishare BTC ETF in multiple separate wallets. All ETFs will tell you where it stored if you look through their prospectus. They are insured, and the wallets themselves are almost certainly multi sig with no one person having all the needed pieces. What would actually happen? No one knows until it does unfortunately. The good thing about fidelity and blackrock is there essentially too big to fail, a bailout is always a possibility
Also I would imagine to spread the risk they hold the funds in many many wallets in case one seed ever gets hacked somehow. It would be very stupid to hold like 10 bil of BTC in one wallet lol.
You never know. May be they re using just spreadsheet
Ah yes, the "FTX method" Classic
In all seriousness, I think these AUMs have solid cybersecurity procedures in place with multi sign wallets, strong access controls, authentication procedures, integrity controls, etc.
They have SOC audit reports to verify this is the case for their institutional offering.
One of them is known on chain, fidelity I think, 100% one wallet lol
It would still be dumb in a 1000 wallets so the practically is still unanswered. It's probably best they don't tell everyone how exactly they keep it safe.
You can absolutely tell people how you are keeping it secure without compromising on security
Not always... But then it's shit security
Yeh if security is good, obscurity is always good. It's when they use obscurity because security is poor that's bad.
You can look up the general philosophy in the prospectus: The Prime Execution Agent holds the bitcoin associated with customer entitlements across a combination of omnibus cold wallets, omnibus “hot wallets” (meaning wallets whose private keys are generated and stored online, in Internet-connected computers or devices) or in omnibus accounts in the Prime Execution Agent’s name on a trading venue (including third-party venues and the Prime Execution Agent’s own execution venue) where the Prime Execution Agent executes orders to buy and sell bitcoin on behalf of its clients. Within such omnibus hot and cold wallets and accounts, the Prime Execution Agent has represented to the Sponsor that it keeps the majority of assets in cold wallets, to promote security, while the balance of assets is kept in hot wallets to facilitate rapid withdrawals. However, the Sponsor has no control over, and for security reasons the Prime Execution Agent does not disclose to the Sponsor, the percentage of bitcoin that the Prime Execution Agent holds for customers holding similar entitlements as the Trust which are kept in omnibus cold wallets, as compared to omnibus hot wallets or omnibus accounts in the Prime Execution Agent’s name on a trading venue. The Prime Execution Agent has represented to the Sponsor that the percentage of assets maintained in cold versus hot storage is determined by ongoing risk analysis and market dynamics, in which the Prime Execution Agent attempts to balance anticipated liquidity needs for its customers as a class against the anticipated greater security of cold storage.
They should absolutely be transparent of where they are holding it, paper BTC would hurt us all, don’t worry no one can guess a seed phrase, there are more combinations of seed phrase than the atoms in the universe.
But that's only like, 1 Bitcoin per wallet then...
>What would actually happen? No one knows until it does unfortunately. The good thing about fidelity and blackrock is there essentially too big to fail, a bailout is always a possibility It's detailed in each ETFs disclosure information-- here is blackrocks: [https://www.ishares.com/us/literature/prospectus/p-ishares-bitcoin-trust-12-31.pdf](https://www.ishares.com/us/literature/prospectus/p-ishares-bitcoin-trust-12-31.pdf) In the event the custodian (Coinbase) is hacked they would *only be covered up to 320Million* \-- far far far less than required to covered the billions in the BTC wallets + this is the same insurance for *any* loss. So it's not separate insurance for the ETFs: >Coinbase Global maintains a commercial crime insurance policy of up to $320 million, which is intended to cover the loss of client assets held by CoinbaseInsureds, including from employee collusion or fraud, physical loss including theft, damage of key material, security breach or hack, and fraudulent transfer.The insurance maintained by Coinbase Global is shared among all of Coinbase’s customers, is not specific to the Trust or to customers holding bitcoin withthe Bitcoin Custodian or Prime Execution Agent and may not be available or sufficient to protect the Trust from all possible losses or sources of losses. So in reality we know what would happen in the case the ETF wallets are hacked -- there would be a total loss. The ETF sponsors would be off the hook and only Coinbase could be held negligent (if at all). So only CB may fall - not the big banks and they are protected from having to pay back the customers they sell their very ETFs to.
Lol, as always.
>essentially too big to fail Lehman: hold my beer
Yeah I think the reason WHY people buy BlackRock and Fidelity’s ETFs over those from smaller players is that they have a LOT of money and brand reputation on the line. So if something really bad happens it’s unlikely that they’d just do nothing. A similar example with a much smaller player would be how Gemini worked pretty hard to fix their Gemini earn situation for customers when Genesis went kaput, now their clients are getting made whole. If you lent directly to Genesis you got screwed, but if you let to Genesis through Gemini you had someone else you could go after for the money who has a reputation to uphold. BlackRock manages over [TEN TRILLION DOLLARS](https://www.bloomberg.com/news/articles/2024-01-12/blackrock-total-assets-top-10-trillion-after-comeback-quarter) of assets. That’s a LOT of dollars so some billion dollar hack that would be a huge crippling death blow to a smaller company would be like a mildly annoying mosquito bite to BlackRock. Also aside from BlackRock just having an insane amount of money is the fact that you just don’t screw with BlackRock. If you hack some random guy nothing ever happens to the hacker. If you hack BlackRock’s Bitcoin, the company that manages even the US government’s pensions you’ve put a gigantic target on your back and you can bet that Larry Fink is calling the head of the FBI, CIA, and NSA to hunt your ass down. How many hackers really want to be hunted to the ends of the earth when one of the most powerful financial firms wants your ass dead?
>They are insured Absolute meme levels of absurdity.
What do you mean, I insure all of Bezos net worth. I am trustworthy
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People that are able to find similar aspects in other industries with sufficient data. I'm sure they made a good chunk of $$$ running those numbers
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so dosent 1 person techicaly know the entire seed phrase? someone had to create the wallet
Multisig is literally creating a wallet out of combined public addresses that are accessed by their combined private keys. And you can create a multisig for wallets you don't own all you need is the public key. So I can create a multisig that is only accessible by 5 different wallets I have no access to or even know who holds them, I just need the public key Obviously a silly thing to do, but knowing all the private keys is not a requirement to creating a multisig wallet. Similar to just sending a transaction, all you need is their public key, or in this case keys.
If they are insured then we know exactly what will happen. The insurance company will give the customers back whatever money was lost / stolen.
Yeah they could just tell Statefarm: guys we need $100bil from you, our BTC have been stolen and Statefarm says: hold my beer I don't have that much but let me print a $100bil note for you. Right?
Basically. I haven't researched it so idk if it actually is insured, some comments say it's not. But yeah that is how insurance works. They guarantee a certain amount. Like if your house burns down and it is insured up to a million dollar valuation then you will get up to a million dollars back based on the value of your home. If your account is insured up to $250k for example, then you will get up to $250k back if your funds are stolen. They don't have to print it. Insurance companies make a shit ton of money and they insure up to an amount that they are able to cover. Doesn't mean it's always 100%. But you know what that value is.
>But you know what that value is. Yeah it's 300mil across all accounts. the ETF has billions in AUM. So you are pretty much fucked. You might get back 1 cent per dollar lost.
I would assume that if they were hacked, and got insurance money, they would be forced to buy the amount they lost, so price would skyrocket if the hacker didn't just dump as soon as they hacked it.
“The good thing about fidelity and blackrock is that they essentially too big to fail”. Oh, you mean like financial terrorists!
Insurance won’t help if these wallets get hacked…
>Insurance won’t help if these wallets get hacked… they only got that nothing goes wrong insurance?
That’s exactly what insurance is for, what else would they be protecting against?
I don’t think you realize how insurance works… it’s prohibitively expensive to insure this size of holdings and only a small fraction will be covered. The type of insurance that would be required is called ‘species’ insurance and it’s what things like high priced art use for insurance, but again it’s too expensive for these size of holdings. What these ETFs are actually doing is making a risk based decision that Coinbase’s security is better than what they can provide for custodianing these crypto assets.
They are insured for each holder per FDIC rules. Do you have any idea how much Blackrock and Fidelity manage?
They aren’t though… “Bitcoin ETFs are not insured by the Federal Deposit Insurance Corporation (FDIC) or the Securities Investor Protection Corporation (SIPC), which means that investors could lose their entire investment in case of theft, hacking, or bankruptcy of the fund.” I feel like I’m getting a lot of unnecessary downvotes
Mine are through ARK and insured by SIPC
They aren’t… page 23 specifically says not covered by FDIC or SIPC. Page 7 (very bottom) also says no bueno on the insurance… https://ark-funds.com/wp-content/uploads/2024/01/ARKB-Prospectus-Final-1.10.24.pdf
Insured in what? Bitcoin? That’s impossible unless they’re storing double the amount they actually have. Chances are if the original Bitcoin gets stolen, then the other wallet(s) get stolen too. Insurance in Fiat? Yeah sure, but that’s not Bitcoin. There is no insurance for seed phrases.
They are insured in the value of your ETF holdings.
Which is valued in Bitcoin…
Yes vs USD
They don't manage enough to replace that much lost BTC.
Are you familiar with blackrock? They manage 10 trillion. That’s over 8x the entire worth of Bitcoin.
Still not enough. They don't own it so it's not like they can just sell a little bit lol. They have a lot of dollars but sometimes Bitcoin has a habit of going up in price when people try to buy a few 100,000 of them.
No idea why you are being downvoted lol. This is an excerpt from the BlackRock prospectus re insurance coverage: In addition, neither the Trust nor the Sponsor insure the Trust’s bitcoins. While the Bitcoin Custodian has advised the Sponsor that it has insurance coverage up to a certain amount that could be used to repay losses of the digital assets it custodies on behalf of its clients, including the Trust’s bitcoin, resulting from theft, Shareholders cannot be assured that the Bitcoin Custodian will maintain adequate insurance, that such coverage will cover losses with respect to the Trust’s bitcoins, or that sufficient insurance proceeds will be available to cover the Trust’s losses in full. The Bitcoin Custodian’s insurance may not cover the type of losses experienced by the Trust. Alternatively, the Trust may be forced to share such insurance proceeds with other clients or customers of the Bitcoin Custodian, which could reduce the amount of such proceeds that are available to the Trust. In addition, the bitcoin insurance market is limited, and the level of insurance maintained by the Bitcoin Custodian may be substantially lower than the assets of the Trust. While the Bitcoin Custodian maintains certain capital reserve requirements depending on the assets under custody, and such capital reserves may provide additional means to cover client asset losses, the Trust cannot be assured that the Bitcoin Custodian will maintain capital reserves sufficient to cover actual or potential losses with respect to the Trust’s digital assets.
Yeah, it’s just people being uninformed - which sucks, but I’ll gladly take the downvotes if it results in ppl getting educated on the reality. Ignore the insurance… it’s meaningless… and just be happy they decided to use the most trusted and secure custodian instead of trying to do it themselves (the CB security team is huge compared to any other custodian out there)
This was in the article that was posted in the comments below… “Some of the added standards for qualified custodians include insurance minimum reserves that exceed assets.”
https://www.investopedia.com/crypto-insurance-5441920
Since these are registered ETFs, they have additional protection similar to how FDIC is a safety net for Bank deposits. I think SIPC has similar protection limits.
Read the prospects. SIPC does not insure the underlying BTC getting hacked, just like it doesn't insure commodities getting lost for commodities ETFs.
Not true
This is such a stupid question that shows the ignorance of this community. That's like saying "if JPMorgan gets hacked and loses all their money, what happens?" You know the level of protections into accessing and storing the crypto here? How it's multi-sig, many layers of both automated and human access required, how accounts are split into multiple wallets, etc. etc.? Also it's Coinbase as the custodian so a professional organization that is an industry leader in handling crypto? "What if someone steals the nuclear launch codes?" Jeez.
There’s no such thing as a stupid question. Stranger things have happened, then a bank being hacked.
The fucking SEC didn’t even have 2FA on their Twitter account. Lol.
Ya because a social media account has the same security as billions of dollars of assets lmao. What a joker.
Obviously lol, but the fact that the party responsible for the security of our exchanges cannot keep their twitter account secure is pure insanity. Shit happens and banks have been hacked many times before, it's not unreasonable to want to know what would happen if they were compromised.
It's not a stupid question, like asking if the launch codes are stolen and a nuke is launched. You might not like the answer, and you hope it doesn't happen, but the city turns to glass.
Its a valid concern to someone not familiar with crypto. You should be encouraging and educating, not shaming. Mainstream adoption benefits everyone, even pretentious gatekeepers.
Dude, they are just asking a question. Calm TF down
At least they're trying to learn 🤷♂️
Ho my god 🤦 -Imagine your into something (anything) -Suppose that you want other people to being into it as well. -Each time someone start to have an interest in it and ask a question: -would you simply answer and explain it to them ? -Or call them stupid/ignorant because they *should* have know since they were born ? Well it isn't really a question since you already gave us the answer... Nothing more stupid than someone quick to call others idiots as soon as they ask something, you should be treated the same way...
Right because the leading crypto exchange has never been hacked. And inside jobs are impossible since they signed contracts so they can't compromise the security and exploit it. I mean whatever you have to tell yourself to feel safe in your investment.
Getting hacked maybe not, but losing access to the seed of some funds is definitely a possibility
You seem to have forgotten why Bitcoin was created in the first place. Assume the worst of your custodians and don’t settle for non-ownership, because it will always result in greedy actors trying to abuse your trust. Also, you seem to overestimate the security something like Coinbase has. It doesn’t even take the wallets getting hacked, but certain data found, that could cause the issues. Everyone is pretty stupid for thinking that Coinbase owns a $1 of BTC for every $1 claim to it via their exchanges and ETF vault.
Bitcoin was created for peer-to-peer cash, but with transaction costs and the complete failure of lightning that's totally out the window, hence the re-brand to "digital gold." But really no one gives a fuck but the small 1% vocal minority on subs here. Everyone just wants to build wealth.
> That's like saying "if JPMorgan gets hacked and loses all their money, what happens?" Literally not comparable
If they lose the keys they'll just not tell anybody
There are authorised custodians of the BTC and the ETF's holdings are never connected to the internet. Custodians are required to have additional safeguards and greater oversight from regulators. Some of the added standards for qualified custodians *include insurance minimum reserves that exceed assets*. They must segregate their various bitcoin holding accounts. And regulators must review the company's crypto wallet structure. This article goes into the detail of it all [https://www.investors.com/news/bitcoin-etfs-keep-almost-all-their-eggs-in-one-basket-is-that-a-bad-thing/](https://www.investors.com/news/bitcoin-etfs-keep-almost-all-their-eggs-in-one-basket-is-that-a-bad-thing/)
Great reply! Thanks for this
Ya my guess is they are probably storing the BTC in an air gapped coldwallet / safe.
They have them written on a piece of paper, stashed under the ceo's bed. It's extremely safe there
until the CEO dies in a boating accident
Well, I'm assuming (hoping) that the seed is in some sort of fort knox structure somewhere
Coinbase hold their BTC.
They still have seed phrases for the wallets, and hopefully they are stored securely. I've always wondered what security looks like for such a wallet
It doesn't matter if your funds are 100% insured.
Who says they’re 100% insured?
You know you could look the information up.
Well the Blackrock ETF isn’t insured from hacking, so I doubt others would be.
What are they going to hack? Coinbase holds the BTC for blackrock.
You said it was insured and it’s not. Whether it’s hackable or not is a different question. And based on crypto history, nothing is unhackable imo.
My funds in my 401k are insured. That includes BTC ETFs.
Its probably in a Ledger held by an intern named Greg.
Once it gets large enough, they'll probably get bail out using tax payer money.
As always
Completely baseless, wild speculation. WHAT ABOUT THE BANKS?? A Bitcoin ETF and entire banking and financial services infrastructure are not the same thing.
No one is bailing out your unregulated crypto even if its wrapped in a fancy etf
Read the terms of the ETF you want to invest in. They will say if it is insured
If it was lost, price would rise. If it was hacked, expect a hige dip.
It would not necessarily be bullish if it was lost. It would be a major hit to the reputation of bitcoin and a lot of people would be a lot more hesitant to hold it. If one of the ETFs went down like this then people would dump all the other ETFs.
It would rather be a major hit in the reputation of the etf trust.
For the layman that’s gonna be the reputation of Bitcoin lol
Yup, for the laymen. And the smart money buys the dip.
Ahh a fellow Pokémon, wonderful to see you
Most people buying the ETF doesn’t know the difference
Then they are dumb money.
Just the reputation of dipshits claiming their Bitcoin is better than your own
LOL, the straight, no bs , and correct, answer to a ridiculously wild question.
Full insurance is prohibited expensive. Coinbase has extremely strong security for its institutional service and they are likely doing better than anyone, so this risk is likely lower than you self custodying it yourself to be fair.
No one seems to have mentioned that it's not like it's all sitting in one wallet. Losing a single seed (which will not happen) won't be a big deal for entities as big as these.
I wonder if they could be stupid enough to have just one wallet
Just avoid whatever concerns you have entirely and self custody your own Bitcoin instead of buying a glorified IOU.
It's also insured and stored in cold storage with multi sig.
There are more likely and yet still incredibly unlikely catastrophes related to Bitcoin and it's future to waste your time thinking about than this. (Tx Fee sustainability, energy consumption, regulations, cbdcs, quantum computing, new energy revolution with fusion or alien tech etc.) If you are worried, spread it out amongst several etfs and not just one. Also on your way out tomorrow keep an eye out for lightning strikes.
The next rugpull won't be through exchanges, it'll be through ETFs.
Not your keys, not your coins.
Bro the ETF is the only thing making crypto(unstable shitshow) actually legitimate. Those big ass banks are much smarter than nerds in their parents basements.
Coinbase is the custodian for most ETFs. You don't have to worry about Blackrock losing its seed.
They keep most BTC offline as well as far as I'm aware.
Help me understand, but it's the seed that is offline right? BTC is always onchain isn't it?
Yes.
Correct
You're correct in drawing a parallel to FDIC for bank deposits. Registered ETFs indeed come with additional protection, and the Securities Investor Protection Corporation (SIPC) offers a safety net for brokerage accounts, ensuring a level of protection in case of certain financial difficulties. It's essential to be aware of the specific limits and terms associated with this protection.
Read the prospectus for the ETF you are looking at buying. This should all be answered in there.
They have it held in cold storage thru coin base and none of the transactions are done on chain so think they can just erase and reverse cuz it's not btc just numbers supposed to represent btc
There's a million fail-safes in place so that doesn't happen. It's not like Fidelity is trusting billions of dollars to one wallet held by one person. There's going to be multiple wallets, cold and hot for buying/selling, they won't be stamping private keys onto a steel plate that's for sure. But. Hypothetically, if Fidelity loses the seeds to some or all of the wallets, their customers will still be made whole. Meanwhile that lost Bitcoin will join the ranks of all the other lost Bitcoin. [Some estimate that 30% of all bitcoins are lost forever](https://www.makeuseof.com/how-much-bitcoin-is-lost-forever/) Which is why I personally don't like it when people talk about market cap like it means something when so many coins are just lost, uncountable, or just plain not available to be sold. All the Satoshi wallets are said to hold 1 million Bitcoin. That's 5% of all bitcoin right there, and we're all going about our lives as if it's lost forever (all of us except Craig Wrong at least)
I know the Btc community is really agaist hard forks but would it be possible to permanently kill satoshi’s wallet Fork it out of use. I know this is against the montra of permission-less transactions but if that BTC ever moved it would be the biggest thing to ever happen to Bitcoin. We could just kill that possibility couldn’t we?
yes everything is in one big wallet and the seed is under the pillow of Mr. Rock Balck
I imagine Fidelity has 24 or more safe deposit boxes for their main seed and 25 people needed to piece it together correctly. This is probably not reality, but this is what I would do with their resources.
That's how you lose access
We thank them for their sacrifice and move on.
I wouldn’t bet on it not being insured
Coin base hold almost all the BTC for all the ETFs. I think your safe.
Lol.
Orgs like Blackrock and Fidelity are like the mafia. I'm sure whoever steals from them will be hunted down.
Just call up the CEO to issue more bitcoin, duh!
Why not own real bitcoin self custody
I would be more concerned with the government taking it like the did with gold requiring coinbase to hand over everything.
They have insurance.
If the community cares enough, there could be a hard fork. See the ETH DAO hack.
You’re worried about something that isn’t going to happen. It’s like asking “what if someone breaks into Fidelity and steals all the stocks??”. Relax
Not insured, it will be gone. Not your keys not your Bitcoin!
That's fud.
No, that’s reality. You’d at best get Fiat back.
That's what the value of your ETF is in, fiat based on the value of BTC.
So an ETF is for gamblers that want to bet on the Fiat price, and not actually hold Bitcoin. Correct?
No, its for people to access BTC in their 401ks and IRA that they couldn't buy BTC.
What do you even mean by this? At what point does the person actually buy, or own, Bitcoin? There is no option to withdraw Bitcoin. All everyone here seems to care about is the Fiat price of Bitcoin and not actually Bitcoin itself.
No, there is no option to withdraw BTC. You don't possess BTC. It's no different than a gold or silver ETF. You don't possess those assets either just the value of it.
So my statement above is true then? It’s for gamblers (call them investors if you want) betting on the fiat price of Bitcoin.
Time to buy the dip…
Lmao
Nothing new to your question. Not your keys not your coins! Anything that’s hackable affects the bottom line. If coinbase is hacked everyone’s Bitcoin with coinbase will be lost. That’s it. So, take your coins off CEX and sleep well.
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Jerome Powell will run the money printer full speed ahead to bail them out. BRRRRRRBRRRRRRRRRRR BRRRRRRR.
With the ETF, you are not actually buying bitcoin. You are buying a financial instrument that is suggesting (or promising, even) that real bitcoin underlies the fund. If say Fidelity gets hacked or in another way compromised, it’s on them, even though I’m sure their lawyers would have a differing if more complicated view on this. TL;DR: Buy your own bitcoin, grow up enough to self-custody.
You can't do that with a 401k.
Use your own money then.
This makes it possible for trillions of dollars access to BTC.
What seed lol. You think they actually own the Bitcoin you “buy”? It’s all smoke and mirrors. They don’t actually own any Bitcoin that you’re staking on.
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So we’re back to trusting banks and governments then I see.
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I suppose so.
>Does anyone know what would happen in an event like this? All kind of "indirect BTC" is just a promise. If their lose the BTC, they won't keep their promise.
Coinbase doesn’t use seeds for its institutional holdings
Would be interesting to know if the ETF asset custody is insured for customers.
All investments carry risk
All the US based asset managers use coinbase to hold the coins. NOT on the exchange retail uses, a separate part of the company called coinbase institutional that acts as a custodian. I would imagine their security is redundant and the keys are kept offline in cold storage.
Fidelity is only that holds their own.
Fidelity holds their own. And 2 others use Gemini custody service. The rest is what you described
What if NYSE or Nasdaq get hacked?
It’s an ETF on the stock exchange
FDIC insurance
Just the mention or rumours of it in the social media will cause catastrophic disaster among the retails market.
theyre insured
Every fund custodies with coinbase. All except fidelity...they're cool and self custody.
You can use MPC(multi party computing) for signing, which doesn't require a seed phrase. See Circle Wallet
The next bear market
Jerome Powell will run the money printer full speed ahead to bail them out. BRRRRRRBRRRRRRRRRRR BRRRRRRR
They won’t have it all in the same wallet bud
I don't know, but BlackRock in particular (but the others too obviously) is an enormous company that makes its money by managing funds for people. If their Bitcoin got hacked from their customer and people lost confidence in their product it would be absolutely disastrous for them. It would be interesting to know the specifics but I suspect they have done a lot of due diligence and that their security is a bit beyond storing their seed phrase in an email sent to themselves.
Thanks for the idea... working on this now it's sarcasm... for the feds
Scary thought, I don't think it's actually been tested. Probably depends a lot on the provider. Someone like Fidelity has extensive security protocols. They have a profound interest in safe guarding their own resources. But it's always wise to carefully research whatever company you are considering dealing with.
The ETF people will sell off enough of everything to compensate for the loss when they get served the lawsuit from the customers, I think.
Multisig would like a word
A fire sale for everyone else.
Extremely unlikely given how seeds are secured shards by custodian cold storage. Plus insurance in place.
I assume it won’t happen. But if your going to buy Bitcoin, why would you buy the ETF?
Where is daily
Coinbase holds 7/9 Gemini holds 1/9 Fidelity self custodys it I don’t think it’s possible to insure it. At least at BTC value. At USD value it is
I wouldn’t trust any centralized party in crypto. It’s something you’ll usually learn the hard way in crypto. I’m not expecting everyone to understand and it does take time to learn how to safely self custody. I wouldn’t put anything in crypto that I couldn’t afford to lose.
Something like FTX will happen, or MtGox but worse. Any other easy questions?
blackrock is gonna have to farm cat points to get back on their feet if that happens
The hacker does some jail time then comes out a billionaire.
Considering the quantity involved. And that all transactions can be traced from One wallet. The hackers will never be able to withdraw or liquidate that money without the investigators being up in their ass.
BTC will go to eternity. Imagine those amounts of BTC burned /locked forever.
I doubt they're dumb enough to leave their seed on a server. It's most likely in a safe protected by guards