Bitcoin self-custody shields users from institutional risks — Trezor
2025-01-27
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Hardware wallet provider Trezor has highlighted the importance of self-custody in safeguarding Bitcoin holders against potential failures of centralized institutions as institutional adoption of the cryptocurrency continues to grow.
Institutional adoption is a great contributor to mainstream recognition of Bitcoin BTCUSD and price appreciation, but it still introduces certain risks, Trezor’s Bitcoin analyst Lucien Bourdon told Cointelegraph.
“Institutional involvement introduces centralization, with single entities holding large amounts of Bitcoin,” Bourdon said, adding that institutional adoption is associated with risks like volatility and negative sentiment if institutional investors face significant issues or even collapse.
Self-custody — or a method of holding crypto without relying on any third-party — is a long-term solution to possible centralized failures, Bourdon stated.
Holding Bitcoin is not the same as owning MicroStrategy or Bitcoin ETFs
Institutional adoption has enabled billions in corporate money to flow into Bitcoin through products like Bitcoin exchange-traded funds (ETF), which saw $38 billion of inflows in 2024.
While Trezor doesn’t oppose institutional adoption, the firm still has a cautionary reminder that owning shares of MicroStrategy or Bitcoin ETFs is not the same as holding actual Bitcoin in self-custody.
“If these institutions encounter problems, investors relying on them may face losses without the protections self-custody provides,” Bourdon said, adding:
Individuals hold the majority of the Bitcoin supply
While institutions and governments have been increasingly accumulating Bitcoin, individuals still hold the majority of Bitcoin supply, Bourdon said.
According to a CoinGecko report from 2024, governments collectively held around 471,000 BTC by the end of last year, accounting for just 2.2% of Bitcoin's total supply.
Such a distribution is leaving governments “playing catch-up,” the analyst said, adding that this dynamic underscores Bitcoin’s decentralized ethos, where power is distributed among individuals rather than centralized institutions.
“State adoption can bring positives, such as encouraging fiscal discipline, promoting transparency, and fostering economic growth. But the heart of Bitcoin’s strength lies in its ability to place control in the hands of the many, not the few,” he said.
In the context of state Bitcoin adoption, Bourdon also mentioned that governments like the United States have shown signs of failing to distinguish between Bitcoin and other coins.
“Unlike Bitcoin, the other cryptocurrencies being discussed for a strategic reserve do not have a fixed supply and are issued or controlled by central entities,” he said, adding: “These assets lack the fixed scarcity and commodity-like qualities that make Bitcoin uniquely suited for a reserve asset role.”
Trezor calls to “ignore the noise” and focus on Bitcoin independence
While self-custody allows users to independently store assets like Bitcoin, it is associated with at least one crucial downside: users must fully take on the responsibility of storing their private keys. If a private key is lost or stolen, there is no way for users to reclaim their assets.
Despite this downside, the self-custody trend has been growing, with the self-custodial Trust Wallet seeing record downloads last year and Trezor reporting record demand amid record highs in the BTC price.
“As crypto adoption continues to expand, self-custody will naturally follow,” Trezor’s Bourdon said, adding:
“This evolution not only reflects a shift in user behavior but also a broader cultural movement toward personal responsibility and empowerment in the digital age.”
To celebrate Bitcoin independence and financial sovereignty, Trezor is launching a limited hardware wallet edition called Trezor Safe 5 Freedom Edition.
Going under the statement “Independence isn’t given — it’s taken,” Trezor’s Freedom Edition will offer a total of 2,100 devices starting from Jan. 30.
“As history has shown, Bitcoin outlasts crises and distractions,” Bourdon said, adding: “The best way forward is to secure your wealth, ignore the noise, and trust in the power of sound money to offer stability and independence.”