（Singapore, 07.09.2026）A Bitcoin-linked blockchain used by several cryptocurrency exchanges has suffered a major security breach, with about $320 million (S$405 million) worth of Bitcoin withdrawn from its reserves, adding to a series of attacks that have renewed concerns over the safety of digital-asset infrastructure.
Liquid Network said around 4,000 of the 4,200 Bitcoin held in its Liquid Federation wallet were withdrawn in the incident, representing roughly 95% of the wallet’s holdings. The network described those responsible as “purported white-hat hackers,” a term generally used for hackers who identify security vulnerabilities and may later return the funds, sometimes in exchange for a reward.
The network has halted new transactions while federation members investigate the breach and work to restore normal operations. Liquid warned that wallets operating on the network would be affected, although the full impact on users and participating exchanges remains unclear.
According to Liquid, the Bitcoin was withdrawn through SideSwap, a settlement platform authorised to process withdrawals from the network. However, it said the key used to facilitate the transactions had not been compromised, raising questions over how the funds were able to leave the federation wallet.
Cybersecurity experts are now examining whether the problem may have involved the mechanism used to issue Liquid Bitcoin, known as L-BTC. Aneirin Flynn, chief executive of cybersecurity technology firm FailSafe, said preliminary evidence suggested a bug may have allowed additional L-BTC to be created.
The incident could be particularly significant because Liquid operates differently from the main Bitcoin blockchain. Launched in 2018 by blockchain technology company Blockstream, the network was designed to provide faster and cheaper transactions for exchanges, traders and other financial institutions.
Bitcoin transactions on the main blockchain can become slower and more expensive during periods of heavy network activity. Liquid seeks to address this by locking Bitcoin and issuing an equivalent amount of L-BTC that can move more quickly within its own network.
Blockstream says Liquid is now managed by a federation of more than 80 exchanges, infrastructure providers and asset managers. Companies listed as users include cryptocurrency exchanges BTSE and Bitfinex, which shares a parent company with Tether, the issuer of the world’s largest stablecoin. BitMEX, which has announced plans to shut down this month, has also used the network.
Crypto Security Back in Focus
The latest breach comes as the cryptocurrency industry continues to struggle with attacks targeting exchanges, lending platforms, wallets and the infrastructure connecting different blockchain networks.
Just last week, an attacker removed about $6 million (S$7.6 million) from a digital-asset lending platform linked to Crypto.com, while an August breach involving Coldcard, a popular offline Bitcoin wallet, raised further questions about how investors should safely store their cryptocurrency.
The Liquid incident is potentially more serious because of the scale of the assets involved and the network’s role in providing settlement infrastructure. Flynn said the withdrawal of roughly 95% of reserves, combined with the suspension of the network, highlights potential weaknesses in the way Liquid validates transactions and backs L-BTC.
The timing also comes as Bitcoin attempts to rebuild momentum following a volatile year. The cryptocurrency climbed back above $80,000 last week after dropping below $60,000 earlier in 2026, helped by stronger stock markets, falling US Treasury yields and a weaker dollar.
Bitcoin jumped as much as 5.7% on Thursday and briefly reached its highest level since May. It was trading at around $81,475 in late New York trading that day, although the cryptocurrency remained about 35% below the record high reached last October.
Demand from US investors has also remained uneven despite the rebound. Inflows into US-listed spot Bitcoin exchange-traded funds improved in August, but sizeable withdrawals on some days have raised questions over whether institutional demand is strong enough to sustain another rally.
Glassnode data showed the seven-day average intake into Bitcoin ETFs reached about $290 million a day during the recent advance, although overall trading activity remained weaker than during previous bull-market rallies. Analysts have said a sustained move above $82,000, supported by consistent ETF inflows, would provide stronger evidence that Bitcoin is breaking out of its recent trading range.
The broader cryptocurrency sector has already experienced a difficult year. Companies built around holding large amounts of Bitcoin have also come under pressure as cryptocurrency prices weakened and investors became less willing to pay premiums for listed companies that mainly provide exposure to digital assets.
Nakamoto Inc., for example, has seen its shares fall about 99% from their peak since the merger that created the company’s public-market Bitcoin vehicle was announced in May 2025. The company sold $20 million worth of Bitcoin at a loss in March to fund operations and has shifted its attention towards acquiring cash-generating businesses.
For the wider market, attention is now turning to whether the Bitcoin taken from Liquid will be returned and how federation members address the vulnerability behind the withdrawal. Liquid has yet to provide a timetable for restoring transactions, while the incident is likely to bring fresh scrutiny to the security of blockchain networks designed to make Bitcoin faster and easier to use.
