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Self-custody was once the ultimate badge of credibility for cryptocurrencies. A declaration that we believe in sovereignty over convenience, code over blind trust, and codes over legal fine print. But for many of the earliest and wealthiest adopters of this universe, that belief is beginning to bend under a different kind of pressure: a wrench attack.
In today’s world of organized crime, identity theft, and five-dollar wrench attacks, even the most seasoned Bitcoin users are locking up more than just their coins. Their ideology is also kept in a safe.
5 dollar wrench attack increase
Ten years ago, wrench attack jokes were mostly circulating on privacy forums. This meme from a 2015 XKCD comic encapsulates a cruel truth. You can’t brute force a passphrase, but you can blackmail someone with a $5 wrench until they tell you.
OG Bitcoiner Jameson Ropp, co-founder of Casa and administrator of the “Physical Bitcoin Attacks” directory, has spent years documenting instances of wrench attacks in which everyday crypto holders are beaten, taken hostage, or worse because of their on-chain visibility.
The directory currently lists more than 200 confirmed cases spanning at least 34 countries. From a European trader kidnapped at gunpoint to influencers targeted after posting their asset flex online. As of October 2025, the roster has recorded 52 wrench attacks this year alone (more than one per week), with overall physical assaults up 169% since February.
In late October 2025, Russian influencer Sergei Domogatsky was kidnapped in Bali by masked assailants, shot with a Taser, beaten, and forced to transfer approximately $4,600 in cryptocurrency from his cell phone to their bank account. As Ropp previously told me, this is part of a growing trend of wrench attacks in the region.
“For example, I have seen many cases where Russian nationals vacationing or living in Southeast Asia have fallen victim to Russian organized crime. They come in, attack violently, and then try to leave as quickly as possible, perhaps trying to take advantage of jurisdictional rulings.”
When the protector comes off
Even veteran cypherpunks are taking notice. In a recent interview on What Bitcoin Did, on-chain analyst Willy Wu admitted:
“I’m not self-managing anymore…I think you’re going to see more people who have been in this field longer doing the same thing.”
Wu emphasized that while small holders absolutely need to remain in control of their coins, large balances and public profiles create a completely different threat model. Losing your hardware wallet is no longer a problem. It’s about personal safety.
Many others share his view. The Bitcoin family, known for selling everything to live off Bitcoin, told CNBC in June that they had abandoned single-device wallets and built scattered analog and digital fortresses.
They divided their seed phrases and encrypted data into four continents. Didi Taihutu, the family’s patriarch, said:
“Even if someone were to pull a gun on me, I wouldn’t be able to give them anything more than what’s in my wallet or cell phone. And it wouldn’t be much.”
Both Mr. Wu and Mr. Taihutu were once representatives of complete sovereignty. Their quiet retreat points to a broader change in sentiment (which is now confirmed by the numbers).
From cold storage to Wall Street storage
Somehow, Wall Street managed to do what most people thought possible. The idea is to lure whales that have held Bitcoin for years into a regulated enclosure. According to a recent Bloomberg article, a new breed of cautious ultra-rich people are quietly unloading their cold wallets and moving billions of dollars into spot ETFs (sometimes without much fuss on the blockchain).
Thanks to “in-kind transfers,” these whales can directly exchange BTC for ETF shares and avoid taxable sales. BlackRock alone has generated more than $3 billion in revenue through this channel since July. The Wild West game of keys and ledgers suddenly started to look a lot like traditional finance. Everything comes packaged with a glossy ticker symbol and tons of paperwork.
“This scared me a little bit,” said Bitcoin advocate and human rights activist Alex Gladstein. For someone who has spent his career documenting how repressive regimes freeze assets and lock citizens out of the international financial system, watching Bitcoin drift toward mainstream financial control feels like watching an escape hatch slowly close.
why? Because safety, reporting, and inheritance will eventually take precedence over ideology.
Srbuhi Avetisyan, head of research and analysis at Owner.One and co-author of Penguin Analytics, recently helped analyze 13,500 high-net-worth families in 18 countries. She shares:
“When balances are high, the risk is not blockchain failure; it is physical enforcement and OPSEC drift (missing seeds, single point wallets). 87% of families keep incomplete asset records and 99.4% lack a verified digital twin of their holdings. Cryptocurrencies often disappear upon incapacitation or death, not because of volatility but because of missing credentials and unclear rights.”
For these families, ETFs and qualified custodians are not about giving in to TradFi. The purpose is to ensure that your heirs can find and pass on something that might otherwise disappear.
Joint Custody: A Reluctant Middle Way
Still, not everyone is ready to return the entire stack to the bank. There is a growing class of “hybrid” custodians who build a bridge between full self-sovereignty and institutional protection.
Seth Fohr Privacy, vice president of self-custody app Cake Wallet, said the wrench issue doesn’t have to be the end of self-custody. It simply forces evolution. He explains:
“Cryptocurrencies are going mainstream, and self-managed solutions need to keep up.”
Beyond using privacy tools like silent payments and payjoin to keep transactions out of public view, he believes the best way to protect celebrities is to stop talking about their wealth.
Mr. Ropp was acutely aware of this point, and told me:
“Connecting to any public network and flaunting your wealth is one of the most dangerous things you can do.”
Seth points to Ropp’s companies, Casa and Unchained, as well as new entrants like Nunchaku and Liana, as examples of “joint custody.” These settings allow users to maintain control while spreading risk through multi-signature arrangements such as 2-of-3 and 3-of-5 schemes with trustees or geographically separated cosigners to remove single points of failure.
Rise of “Digital Fort Knox”
CoinCover Chief Commercial Officer Anthony Yeung also believes that a hybrid model is a realistic path forward.
“Complete independence also comes with risk. If a private key is lost or compromised, assets are often lost forever. Hybrid models address this by combining the best of both worlds: individuals retain direct control and ownership of their assets, while a trusted authority provides a safety net through secure backup and recovery mechanisms.”
He calls it a “digital Fort Knox.” It’s still controlled by the user, but it’s institutionalized enough to allow secure backups, key recovery, and even triggering inheritance. Yong added:
“These could be the bridge that takes the next generation of users from Web2 to Web3.”
Thomas Chen, CEO of Function and managing director at BitGo for six years, agrees, even as he emphasizes personalization and risk tolerance.
“I think the future of the hybrid model will ultimately depend on the risk profile of the users and what they are comfortable with.”
Those who self-custody gain sovereignty, he says, but they lose convenience, especially if they want to pledge assets as collateral, make large transactions, or generally manipulate smart contracts. That’s not the experience that institutional investors want, and it may not be suitable for high-net-worth individuals either. ETFs and custody structures allow Bitcoin to function more like a financial asset than just a collectible. For educational institutions, it’s a non-negotiable. Andrew Gibb, CEO of Twin Stake’s institutional grade non-custodial staking platform, said:
“The custody landscape is moving away from the original crypto ideal of complete self-management towards a model that aligns with the risk appetite and operational rigor of institutional investors.”
In his view, fiduciary duties prohibit relying on untested personal key settings.
Common sense is not centralization
However, not everyone is convinced that this convenience is worth the compromise. Tony Yazbeck, co-founder of The Bitcoin Way, offers a more pointed view.
“People want to overcomplicate this, but it’s actually common sense. Some wealthy holders and institutions convince themselves that it’s safer to park their Bitcoin in ETFs or custodial accounts. They claim that Bitcoin protects them from mistakes, inheritance issues, and even physical threats. In reality, they are simply handing control of the world’s rarest asset to someone else and replacing ownership with red tape.”
Yazbek, who lived through Lebanon’s banking collapse, warns that history shows third parties fail, exchanges collapse, governments seize assets, and administrators freeze withdrawals. His advice is not technical at all.
“The risk of losing your Bitcoin because you trusted an intermediary is much higher than the risk of losing access to your keys if you handle it properly. Multisig setups, secure backups, and simple operational disciplines solve almost all real self-management problems.”
But what is the best defense? Once again, stop drawing attention to yourself.
“Keep quiet about what you’re feeling and live a normal life.”
His mantra is to protect privacy, be accountable, and never outsource what Bitcoin was invented to be trustless.
where the industry is heading
Yaniv Sofer, blockchain expert at EY, believes we are witnessing a financial re-stratification rather than an ideological rupture. He explains:
“Financial institutions are accelerating their entry into digital asset use cases, and custody is a critical core capability.”
Some companies purchase access through third-party providers such as Fireblocks and BitGo, while others build in-house systems that integrate tokenization and payments. Sofer warns:
“Hybrid custody models have not yet gained significant traction among financial institutions, but remain a topic of high interest. Regulatory requirements for qualified custodians continue to favor centralized solutions… However, as the market matures, hybrid models may emerge as a differentiator.”
In Avetisyan’s view, the long-term equilibrium is clear. Most founders run dual rails with core exposure in ETFs or qualified custody for reporting and collateralization, and small self-custodial satellites for censorship resistance.
According to her, this dual-rail system is already changing the flow of liquidity in the cryptocurrency economy. Traditional funding markets are gaining depth and stability as more Bitcoin migrates to custodial wrappers. What about the back side? Sovereignty becomes an option rather than a default.
philosophical hangover
Perhaps what is happening now is more a maturation than an ideological defeat. Bitcoin’s promise of self-sovereignty remains intact for those who choose to support it. Pascal Hébert, Head of Bitcoin at Signum Bank, commented:
“The future of ‘freedom money’ lies in choice. Investors can choose full self-custody, institutional-level protection, or a hybrid model that balances both.”
Hybrid custody, institutional wrappers, and ETF liquidity are all signs of the same evolution of cryptocurrencies entering the structured finance space.
For early believers, it may feel like a betrayal and push self-care into the corner. Yazbek said:
“Thinking you are safe by giving your Bitcoin to others is like a wealthy person being paranoid and surrounded by a military convoy. They look strong, but they are actually weak.”
But perhaps this is actually more decentralization. Distribute risk, trust, and control according to each individual’s desires. Each generation of holders must redraw their own boundaries between freedom and fear. In 2025, that line will run straight through the vault door.
