How Does a Crypto Exchange Hack Affect Cold Wallet Users?

Centralized exchanges (CEXs) have been the go-to platforms for buying, selling, and trading cryptocurrencies. However, because these exchanges hold onto users’ funds and private keys, they often become targets for hackers. 

Notable security breaches at exchanges like Mt. Gox, ByBit, KuCoin, and BitMart have underscored the dangers of relying on these custodial wallets and services to manage your crypto investments.

We've always advocated for moving your funds to cold, self-custodial wallets—not because we are a cold wallet, but because it is the right thing to do. Learn more about moving your Bitcoin and other crypto assets from exchanges.

This raises an important question: How does an exchange getting hacked or going bankrupt affect cold wallet users?  

No direct exposure

Exchange breaches cannot directly impact Tangem users who exclusively store their assets on Tangem hardware wallets. Tangem is a non-custodial wallet, meaning:

• Private keys never leave the card and are never stored on centralized servers.
• Users retain full control over their funds at all times.
• There is no dependency on any centralized exchange to hold, manage, or safeguard user funds.

Therefore, if a CEX is hacked, only the funds held within that exchange are at risk, not your assets stored securely in your Tangem.

Indirect consequences

While Tangem users are shielded from direct theft, exchange breaches can still have indirect consequences:

• Market Volatility

  Exchange hacks often trigger panic selling, leading to significant market drops. Tangem users might see the fiat value of their holdings decline, even though the assets remain safe. 
  
  In February 2025, Bybit exchange was hacked, leading to a loss of $1.5 billion. This event caused the global cryptocurrency market to drop by 19.27% in just a week, decreasing its value from $3.27 trillion to $2.64 trillion.

• On-Ramp and Off-Ramp Disruption

  If a user depends on a specific exchange to trade crypto, a breach could interrupt their access to cash, temporarily making it harder to convert between fiat currency and crypto.

Why cold wallets are resilient

Tangem’s architecture inherently mitigates many of the risks associated with centralized infrastructure:

• Cold storage by default: Funds remain offline and out of reach of hackers.
• No account linking: Tangem does not require users to register accounts, minimizing data exposure.

Conclusion

Tangem users have better security than those who only use centralized exchanges. If an exchange is hacked, it can create market instability, but assets in a Tangem wallet stay safe and separate. This reflects an important idea in Web3: "If you don’t control your keys, you don’t control your coins." With Tangem, users control their keys and gain real financial independence.