On January 25, 2026, 7 on-chain addresses associated with the same entity splurged approximately $21.71 million to buy 4,300 XAUT, almost simultaneously with the revelation by the Gwangju District Prosecutor's Office in South Korea about the disappearance of Bitcoin worth approximately $48.55 million. These two events starkly contrasted the cold reality of the crypto world on the same day. On one side, professional funds were increasing their holdings in risk-averse assets through gold-backed tokens, while on the other, a government agency's mishandling of cryptocurrency via USB drives led to significant assets "vanishing into thin air." Against the backdrop of a $1.328 billion net outflow from Bitcoin spot ETFs in a single day, the direction of funds and asset security became the core of market discussions, with the advantages and disadvantages of custody mechanisms being brought to the forefront like never before.
4,300 XAUT Purchase: Gaining Gold Exposure On-Chain
● Concentrated Buying: According to data from multiple market platforms, 7 Ethereum addresses associated with the same entity concentrated their purchases of approximately 4,300 XAUT at around $5,049 per token on January 25, in the UTC+8 time zone, totaling about $21.71 million. TechFlow described this as one of the largest-scale OTC transactions of XAUT in recent times, with this volume and pace clearly differing from the scattered accumulation by retail investors, aligning more closely with the strategic allocation executed by institutional funds.
● On-Chain Instead of Offline: This large order was completed in a short time, indicating that the buyer did not opt for traditional channels like physical gold or gold ETFs, but instead quickly gained equivalent gold exposure through on-chain assets. This approach allows bypassing the clearing and settlement cycles of the traditional gold market, leveraging the efficiency and transparency of on-chain settlement to smoothly transition from fiat or crypto assets to "gold rights" within the same day, consistent with the behavior characteristics of professional traders familiar with on-chain liquidity.
● Compromise Between Hedging and Efficiency: In a phase of rising global macro uncertainty and amplified volatility in the crypto market, gold-backed tokens are seen as a compromise tool that combines hedging properties and on-chain efficiency. On one hand, XAUT, backed by physical gold, is expected to inherit gold's traditional role in hedging against inflation and systemic risks; on the other hand, the token form maintains the flexibility of on-chain transfers, staking, and portfolio management, allowing funds to quickly switch between risk assets and safe-haven assets without completely exiting the crypto ecosystem.
ETF Bloodletting and Rising Hedging: Dual Trajectories of Fund Migration
● Traditional Funds Reducing Positions: Around the same time on January 25, Bitcoin spot ETFs recorded a single-day net outflow of approximately $1.328 billion, indicating that traditional financial funds chose to reduce positions rather than increase allocations to Bitcoin at this moment. The reduction in ETF holdings often signifies that some institutions or compliant funds have developed a stronger defensive inclination regarding short-term price trends or macro environments, opting to redeem in the open market to lower risk exposure.
● Hedging Flows On-Chain and Compliance: On one side, compliant funds are orderly flowing out of ETF channels, while on the other, there is a significant inflow of on-chain funds linked to gold via XAUT, forming a set of opposing yet temporally overlapping fund trajectories. The reduction in ETF holdings did not simply flow back into fiat or re-enter Bitcoin spot but was partially reflected in the increased volume of "gold tokenized assets" on-chain. This migration resembles a risk repricing and exposure restructuring completed within the same broad asset class space.
● Risk Expectations and Hedging Reevaluation: This set of reverse actions reflects market concerns about Bitcoin's short-term pullback risks and the long-term hedging role of gold being repriced. As macro interest rates, regulatory expectations, or policy uncertainties rise, funds no longer flow unidirectionally into Bitcoin but tend to hedge volatility through gold-backed assets; simultaneously, the choice of XAUT over physical gold indicates that some participants wish to retain hedging properties while continuing to leverage the yield opportunities and portfolio management tools of the on-chain ecosystem, signaling the emergence of a demand for "on-chain hedging."
Bitcoin Disappearance at Gwangju Prosecutor's Office: The Cost of Managing Cryptocurrency with USB Drives
● Official Custody Shortcomings Exposed: The Gwangju District Prosecutor's Office in South Korea was reported to have lost Bitcoin assets under its custody, with an involved value of approximately $48.55 million. This batch of assets originally stemmed from the seizure of accounts suspected of criminal activity but became unaccounted for after entering the official custody system, exposing serious shortcomings in law enforcement agencies' ability to secure and manage crypto assets. Compared to the professional custody solutions of market institutions, the public authority's management capabilities for new types of assets are clearly lagging.
● Analogous Risks of Physical Media: According to multiple media reports citing security experts, the prosecutor's office was accused of managing private keys via USB drives, with some comments bluntly stating that this is akin to "using a paper bag to hold cash"—in the absence of backups, redundancy, and access controls, if the USB drive is damaged, lost, or improperly copied, the assets will be difficult to recover. For Bitcoin valued in the tens of millions, this highly dependent approach on a single physical medium almost concentrates systemic risk onto a cheap piece of hardware.
● Comprehensive Compliance and Responsibility Questions: Following the exposure of the incident, there were comprehensive questions from the public regarding the technical capabilities, compliance processes, and boundaries of responsibility of law enforcement agencies when seizing and managing crypto assets. From the key takeover during the seizure phase to the permission settings during the custody phase, and to subsequent tracing and auditing, current public information indicates that these stages lack professional standards commensurate with the asset volume, creating a systemic gap of "case compliance, custody failure."
Regulatory New Rules Breached: Paper Standards Cannot Prevent Operational Risks
● Standards Gap Leaves Gray Areas: The Virtual Asset Custody Standards that South Korea plans to officially implement in 2025 do not impose mandatory requirements for cold storage, only advocating for secure custody at a principle level. This design gives some institutions the space to continue relying on rudimentary custody solutions, meaning that even large assets involved in cases may still remain under "temporary" or "transitional" rough management models, leading to a significant gap between regulation and practice.
● Absence of Industry Best Practices: The lack of hard requirements for cold storage, multi-signature, and permission tiering—common security practices in the industry—has led to the misuse of fragile media like USB drives for high-value asset custody. Multi-signature should reduce internal malfeasance and single-point failure risks, and offline cold storage should isolate against network attacks, yet in reality, it has been replaced by a low-cost storage device, completely hollowing out the core principles of security architecture at the execution level.
● Incident Prompts Detailed Regulations: This loss incident indicates that a macro-level regulatory framework based solely on principles is far from sufficient to prevent operational risks. To avoid similar issues in the future, it is essential to incorporate technical details such as key management methods, signing mechanisms, access audits, and backup strategies into mandatory standards, and ensure execution through regular audits and accountability mechanisms. Otherwise, even the most comprehensive paper systems will struggle to withstand the systemic risks posed by a substandard USB drive.
Professional Funds and Public Authority: Both Engaging in Crypto, Yet Diverging Views on Security
● Systematic Defense of Professional Funds: The professional funds behind the large XAUT purchases typically employ a combination of multi-signature custody, tiered permission control, and independent risk control systems, breaking down private key management into multiple mutually-reinforcing modules. Whether self-custodied or entrusted to third-party custody, they compress the probability of single-point failures through geographical dispersion, device redundancy, and process standardization, keeping the "loss of coins" risk within quantifiable and auditable boundaries.
● Primitive Stage of Public Institutions: In sharp contrast, some government agencies remain in the physical USB + single-person management early stage of crypto custody concepts, simply replicating traditional management methods for paper evidence or physical cash onto on-chain assets. Their security strategies are clearly lagging behind asset scales, lacking basic multi-party authorization mechanisms, mature emergency plans, and technical support teams, resulting in the party wielding public authority exposing more structural vulnerabilities.
● Formation of the Security Paradox: The crypto asset security paradox is being pushed to the forefront by these two incidents—the more professional the funds, the less they rely on traditional authorities, while assets managed by public authority repeatedly expose technical shortcomings. Market institutions continuously upgrade their security infrastructure under regulatory and competitive pressures, while some law enforcement and regulatory departments, due to budget constraints, cognitive biases, and institutional inertia, resort to the lowest-cost solutions in the most critical security areas. This misalignment not only undermines public trust in official custody but also provides real pressure for future institutional reforms.
From Large Orders to Coin Loss Controversies: The Next Round of Competition Will Focus on Security Infrastructure
The simultaneous occurrence of large XAUT purchases and net outflows from Bitcoin ETFs sends a clear signal to the market: during periods of heightened volatility, investors are no longer solely focused on asset return curves but are placing greater emphasis on the combination configuration of safe-haven assets and custody security. The rise of gold-backed tokens is less about emotional hedging and more about funds seeking a compromise solution on-chain that can hedge risks without completely exiting the crypto ecosystem. Meanwhile, the Gwangju Prosecutor's Office's coin loss incident is likely to accelerate scrutiny of the crypto custody aspects within law enforcement and regulatory systems across countries, opening up policy space for further embedding cold storage, multi-signature mechanisms, and professional custody services into official processes. For institutions and individuals alike, the core advantage in the next phase will no longer be determined solely by "what assets were bought," but by whether they view key management, custody architecture, and security audits as part of their investment portfolio—security infrastructure itself is becoming a new competitive asset.
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