A major security breach has occurred on the Liquid Network, with purported white hat hackers extracting nearly 4,000 Bitcoin, valued at approximately $319 million. This incident has prompted the Liquid team to pause bridge nodes and advise exchanges to halt LBTC deposits and withdrawals as they investigate the breach.
Details of the Breach
The attackers claimed responsibility through an unverified OP_RETURN message stating, “we are whitehats. contact us on chain.” Following the breach, the balance of Liquid’s federation wallet plummeted from 4,200 BTC to just 207.275 BTC. The Liquid Network’s mechanics typically require that LBTC be burned before Bitcoin can be withdrawn, necessitating authorization through an 11 of 15 multisig.
Liquid Network confirmed that the funds were withdrawn using the SideSwap PAK (Peg-out Authorization Key), asserting that this key was not compromised. They stated, “Bridge nodes have been temporarily disabled, so no new transactions can be submitted to the network,” effectively pausing operations until the issue is resolved.
Market Reactions and Security Concerns
Crypto analyst DBCrypto noted that the coins remain unspent, suggesting a white hat extraction rather than a theft. However, this incident raises significant questions about the security of the Liquid sidechain. DBCrypto pointed out that either the multisig functionaries approved the transaction, or the whitelist designed to prevent such breaches failed.
Blockstream, which operates the Liquid Network, indicated that the L-BTC involved was created due to a bug in the Elements software. As of the latest updates, neither Blockstream nor its CEO Adam Back had publicly addressed the incident on social media, although Jan3 CEO Samson Mow acknowledged the challenges and expressed confidence in resolving the situation.
Bitcoin ETF Inflows Surge
In a contrasting development, Bitcoin ETFs have recorded their strongest inflow period of 2026, with net inflows reaching $3.8 billion over three weeks. The latest data indicates that the funds attracted $986.9 million in the week ending Friday, as Bitcoin trades above $80,000. Total net assets across these funds now stand at $101.3 billion, with cumulative net inflows hitting $55.6 billion.
While Bitcoin has yet to maintain levels above the 50-week moving average necessary to confirm a bull market, these inflows suggest a growing interest in Bitcoin investment products.
Conclusion
The Liquid Network breach highlights vulnerabilities in blockchain security, raising concerns among users and investors. Meanwhile, the surge in Bitcoin ETF inflows indicates a robust interest in cryptocurrency investment, suggesting a potential shift in market dynamics as regulatory frameworks continue to evolve.
This article was produced by NeonPulse.today using human and AI-assisted editorial processes, based on publicly available information. Content may be edited for clarity and style.
