A balanced perspective for investors—and a warning to advisers being swept along by the “moonboy” narrative
Bitcoin inspires unusually polarised thinking.
To its strongest advocates, it is digital gold, an escape from monetary debasement and a decentralised alternative to a financial system they no longer trust. To its strongest critics, it is a speculative token whose price depends largely on persuading someone else to pay more for it later.
Both positions can become ideological.
The more useful question is not whether Bitcoin is good or bad. It is whether an investor understands what they are buying, why they are buying it, what could go wrong and how much of their life plan they are prepared to place at risk.
That question became particularly relevant this week following reports that more than $70 million of Bitcoin had been stolen from cold wallets—without the attacker ever touching the devices.
Bitcoin was not hacked
The incident did not compromise the Bitcoin blockchain.
According to the initial investigation, a weakness in certain Coldcard hardware-wallet firmware produced seed phrases with critically insufficient randomness. Instead of having to guess from the practically limitless range people assumed existed, an attacker could recreate likely private keys offline and search for wallets containing funds. More than 1,000 BTC was reportedly swept from nearly 1,200 addresses during the initially identified attack.
Coldcard’s own firmware guidance now tells Mk3 users to regenerate seeds produced using version 4.0.1 or later because their entropy may have been reduced to around 40 bits.
So the accurate explanation is important:
Bitcoin’s network was not hacked. A product used to access and secure Bitcoin failed.
Anyone holding Bitcoin exposure through an exchange-traded product using different institutional custody arrangements was not exposed to this particular hardware-wallet vulnerability.
That distinction matters. But it should not be used to dismiss what happened.
“Bitcoin wasn’t hacked” is an explanation, not an exoneration
When a traditional financial institution fails, Bitcoin advocates rarely allow the wider system to escape responsibility by saying:
“The pound wasn’t hacked. It was only the bank.”
They quite reasonably examine the entire chain through which people store, access and use their money.
Bitcoin deserves the same scrutiny.
An asset does not exist for its owner merely as a protocol. It exists through an operating system:
- the exchange where it is purchased;
- the wallet where it is held;
- the software generating and protecting the keys;
- the custodian safeguarding it;
- the recovery process if something goes wrong;
- and the human being expected to use all of this correctly.
The blockchain may be intact while the investor’s wealth has disappeared.
That is not merely a technical footnote. It is the lived financial outcome.
Bitcoin has fallen by approximately 45.3% in US-dollar terms over the past 12 months.
On 3 August 2025, Bitcoin closed at about $114,218. It is currently trading at approximately $62,531.
That means:
- $10,000 invested a year ago would now be worth about $5,475
- An investor needs a gain of roughly 82.7% from today’s price merely to return to the previous value
This is a useful counterweight to the “Bitcoin always goes up over time” narrative. The chosen measurement period matters enormously: long-term advocates may quote performance from cycle lows, while recent investors can experience severe losses despite buying into an apparently mature and increasingly institutional asset.
For a UK investor, the precise sterling return would differ slightly because of GBP/USD currency movements, fees and the chosen investment vehicle.
The hidden risk is the Bitcoin access stack
Bitcoin’s base protocol has now operated for many years and has proved impressively resilient. That deserves recognition.
But owning Bitcoin requires far more than the Bitcoin protocol.
It requires what we might call the Bitcoin access stack: the collection of exchanges, wallets, custodians, applications, firmware, bridges, procedures and human behaviours sitting between the asset and its owner.
This is where many of the practical failures occur.
The recurring defence—“Bitcoin itself did not fail”—reveals an important conceptual error. Investors do not experience the protocol in isolation. They experience the whole system required to turn the protocol into usable property.
This creates a paradox:
Bitcoin may be decentralised at the protocol layer while remaining dependency-heavy at the ownership layer.
Self-custody replaces dependence on a bank with dependence on software, hardware, cryptography, operational discipline and personal competence.
Institutional custody reduces some of those responsibilities but reintroduces intermediaries, counterparty risk, commercial incentives and potential points of institutional failure.
There is no risk-free form of custody. There are different bundles of risk.
Self-custody is not the absence of an intermediary
“Not your keys, not your coins” is one of the most memorable phrases in Bitcoin culture.
It contains an important truth: leaving assets with an exchange or custodian means depending on that organisation to remain solvent, honest, competent and accessible.
But the phrase often hides the other half of the equation:
Your keys, your operational risk.
Self-custody means that forgotten credentials, compromised seed phrases, defective devices, malicious software, inheritance failures, coercion, theft and simple human mistakes can become irreversible.
There may be no fraud department, ombudsman, compensation scheme or central authority able to restore the asset.
Bitcoin.org itself describes personal control as meaning that no third party can freeze or lose the funds—but it also states that the owner remains responsible for security and backups.
Sovereignty and responsibility arrive together.
Traditional finance has weaknesses. It also has accumulated defences
Criticism of traditional finance is not misplaced.
Banks fail. Advisers mis-sell. Products conceal charges. Institutions can exploit information asymmetry. Consumer redress can be slow, defensive and inadequate.
But traditional finance has also accumulated layers of protection through repeated failure:
- capital requirements;
- segregation of client assets;
- custody controls;
- external audits;
- operational-resilience standards;
- complaints procedures;
- professional liability;
- ombudsman schemes;
- compensation arrangements;
- and legal mechanisms for correcting mistakes.
These protections are imperfect precisely because institutions are imperfect. They exist because experience has shown what goes wrong.
Much of the crypto ecosystem is still discovering its failure modes in real time.
The UK’s broader cryptoasset regulatory regime is due to begin in October 2027. The FCA is developing rules covering areas including trading, custody, issuance and market abuse, but continues to warn that regulation will not remove the underlying investment risks.
The lesson is not that TradFi is safe and DeFi is dangerous.
It is that maturity is partly the accumulated memory of previous disasters.
Bitcoin’s supporting infrastructure has not yet been tested, standardised and protected to the same extent as much of the traditional financial system it seeks to replace.
The moonboy problem
My principal concern about Bitcoin has never been that nobody should own it.
It is that too much of the public argument is conducted by people who are financially or emotionally invested in its price continuing to rise.
The moonboy narrative tends to follow a familiar pattern:
When the price rises, Bitcoin has proved its value.
When the price falls, weak hands are being shaken out.
When an exchange collapses, the problem was centralisation.
When self-custody fails, the problem was the wallet.
When investors lose their keys, the problem was personal irresponsibility.
When regulation is absent, Bitcoin represents freedom.
When regulation arrives, it represents institutional adoption.
The thesis becomes difficult to falsify because every event is converted into further evidence for the thesis.
That is advocacy, not analysis.
A neutral adviser must be capable of asking what evidence would change their mind. They must also recognise when their own enthusiasm is being reinforced by rising prices, online communities, commercial incentives or fear of appearing behind the curve.
Is Bitcoin an investment, insurance or speculation?
Before deciding how much Bitcoin belongs in a portfolio, investors need to clarify what role they believe it performs.
Is it:
- a long-term store of value;
- insurance against currency debasement;
- a high-volatility growth asset;
- a portfolio diversifier;
- a payment network;
- an expression of distrust in institutions;
- or simply a speculative position based on anticipated price appreciation?
These are not interchangeable propositions.
Bitcoin does not generate earnings, rent, interest or productive cash flow. Its future return depends principally on future demand relative to its constrained supply.
That does not make it worthless. Gold also produces no cash flow, yet people value its scarcity, durability, history and monetary characteristics.
But Bitcoin is not merely “digital gold” because someone repeats the phrase. The comparison must be tested against volatility, liquidity under stress, regulation, custody, market structure, behavioural dynamics and the investor’s intended holding period.
Narrative momentum should not be confused with durable value.
A better framework: purpose, capacity and consequence
A balanced Bitcoin decision can be approached through three questions.
1. Purpose: What job is Bitcoin being asked to do?
The investor should be able to complete this sentence:
“I own Bitcoin because…”
“For the price to go up” is honest, but it describes speculation rather than a financial-planning purpose.
A stronger rationale might concern diversification, monetary-system risk or a deliberate allocation to emerging technology. Even then, the investor should identify why Bitcoin is the appropriate instrument and what evidence would invalidate the thesis.
2. Capacity: Can the investor withstand total loss?
The FCA continues to describe cryptoasset investments as very high risk and says investors should be prepared to lose all the money they invest.
This should not be treated as generic small print.
Loss capacity is not the same as risk tolerance. Someone may feel emotionally comfortable with volatility while lacking the financial capacity to absorb it.
Money required for emergency reserves, near-term spending, debt repayment, retirement income or essential life goals should not be exposed merely because an online commentator predicts another tenfold return.
3. Consequence: What happens to the life plan if the thesis is wrong?
A portfolio is not a leaderboard.
The purpose of wealth is to support a life. The relevant question is therefore not only how much could be gained, but what would be damaged if the investment failed.
Would retirement be delayed?
Would housing security be weakened?
Would relationships become strained?
Would the investor be compelled to sell during a downturn?
Would a loss create shame, anxiety or an attempt to recover through increasingly risky bets?
Financial capital is only one form of wealth. A speculative position can also consume emotional, relational and attentional capital.
Bitcoin may belong in some portfolios—but not as an act of faith
A small allocation to Bitcoin may be reasonable for an informed investor who:
- has secure foundations elsewhere;
- understands its volatility and custody risks;
- has a coherent investment thesis;
- can withstand complete loss;
- does not need the capital within the planning horizon;
- and will rebalance rather than chase momentum.
I have previously described this as exploration capital.
Exploration capital is money deliberately allocated to uncertain opportunities without endangering the core life plan. It creates room for curiosity and potential upside while establishing a firm boundary around the consequences of being wrong.
The appropriate allocation is not determined by how confident the promoter sounds. It is determined by the investor’s total wealth, objectives, resilience and loss capacity.
For one person, that may be zero.
For another, it may be a small single-digit percentage.
For very few people should it become the foundation upon which financial security depends.
Advisers should not become distribution agents for a narrative
There is a legitimate argument that advisers need to understand Bitcoin. Ignoring an asset owned by millions of people does not make clients safer.
But understanding is not the same as promotion.
Advisers jumping onto the Bitcoin bandwagon should ask themselves:
- Am I responding to client need or to market fashion?
- Do I understand the asset, or have I learned the rhetoric?
- Have I examined the strongest opposing case?
- Am I presenting downside scenarios with the same energy as upside forecasts?
- Would I recommend the same allocation after an 80% fall?
- Am I protecting the client from FOMO—or legitimising it?
Professional judgement is most valuable when enthusiasm is greatest.
When everyone is rushing towards the goldfields, advisers should not compete to sell the most exciting pickaxe. Their responsibility is to ask whether the client needs to join the rush at all.
Agency before advocacy
The answer is not to prohibit Bitcoin, ridicule those who own it or pretend that traditional finance has earned unquestioning trust.
The answer is to restore the investor’s ability to think independently.
That means presenting the strongest case for Bitcoin and the strongest case against it. It means distinguishing protocol security from custody security, self-custody from institutional custody, investment from speculation and financial freedom from unmanaged responsibility.
The Coldcard incident did not prove that Bitcoin is broken.
It demonstrated something subtler and more important:
A technically resilient asset can still sit inside a fragile human and commercial system.
Bitcoin may survive perfectly while individual investors lose everything.
That is why the correct question is not simply, “Was Bitcoin hacked?”
It is:
Was the person’s wealth adequately protected across the whole chain of dependencies required to own it?
That is the question balanced financial planning must ask—before the excitement, before the allocation and before the inevitable explanation arrives after something has gone wrong.
This article is for education and discussion and does not constitute personal investment advice. Cryptoassets are high-risk and may not be appropriate for many investors. Anyone considering exposure should assess the investment, custody method, tax position, regulatory protections and potential effect of complete loss on their wider life plan.
Academy of Life Planning 