The Growing Market Opportunity in Crypto Custody Amid Rising Physical Security Risks

The cryptocurrency landscape is undergoing a seismic shift as physical security risks escalate in tandem with the digital asset's growing value. According to a report by Chainalysis, "wrench attacks"-a term describing physical coercion or violence against crypto holders-have surged in frequency, particularly during periods of high Bitcoin price volatility. This trend is not isolated: Kroll's 2025 Cyber Threat Landscape Report notes that physical security threats targeting crypto holders have nearly doubled compared to previous years, with investors increasingly hiring bodyguards and security firms to mitigate risks. These developments underscore a critical vulnerability in the crypto ecosystem: while digital security protocols have advanced, physical threats remain a stark blind spot.

However, this crisis is catalyzing a parallel boom in institutional-grade custody solutions. The market for decentralized, multi-signature, and institutional-grade crypto custody is expanding rapidly, driven by both demand for robust security and regulatory tailwinds. For instance, Paxos recently acquired Fordefi, a provider of multi-party computation (MPC) wallet technology, to enhance its institutional custody offerings. Such acquisitions reflect a broader industry pivot toward solutions that combine cryptographic innovation with operational resilience.

Data from Grand View Research highlights the scale of this opportunity: the decentralized crypto custody market is projected to grow at a compound annual growth rate (CAGR) of 23.6% from 2025 to 2033, reaching a staggering USD 4,378.84 billion by 2033. This growth is fueled by institutional adoption, which is being accelerated by regulatory clarity and strategic investments. MoonPay secured a New York Trust Charter in 2025, enabling it to offer custody services under one of the world's most rigorous regulatory frameworks. Similarly, Tether's investment in Parfin is expanding institutional access to USDT through custody and tokenization tools. These moves signal a maturing market where compliance and security are no longer optional but foundational.

The urgency of addressing physical security risks is further amplified by the increasing concentration of crypto wealth. As Kroll's report emphasizes, attackers are exploiting the visibility of high-net-worth individuals during market peaks, making physical security a non-negotiable component of crypto ownership. This reality is driving demand for custody solutions that decentralize control and eliminate single points of failure. Multi-signature and MPC wallets, which require multiple approvals or distributed cryptographic computations to authorize transactions, are becoming the gold standard for institutional players seeking to mitigate both digital and physical risks.

For investors, the intersection of rising threats and technological innovation presents a compelling opportunity. The crypto custody market is not merely a defensive play-it is a structural growth sector underpinned by regulatory progress, institutional demand, and the inherent vulnerabilities of digital wealth. As the industry continues to grapple with the dual challenges of cyber and physical security, companies that pioneer scalable, compliant, and decentralized custody solutions are poised to capture significant market share.