Liquid Network Paused After Losing 3,996 BTC in Liquidity Shock
Liquid Network, a Layer-2 sidechain settlement network, suffered an unprecedented liquidity shock when roughly 3,996 Bitcoin left its Federation peg wallet in one transaction. This withdrawal erased about 95% of its 4,207 BTC balance, leaving only 197 BTC and disrupting Liquid’s backing structure.
The funds were later moved to an address carrying a white-hat message, keeping recovery possible but uncertain. Meanwhile, operators disabled bridge nodes, effectively pausing Liquid and affecting new transactions. The exchanges also halted Liquid Bitcoin (LBTC) deposits and withdrawals, limiting movement while Federation members investigate.
Liquid’s recovery now depends on regaining the BTC and restoring bridge operations safely, as prolonged disruption could weaken confidence in its federation model.
The incident has raised questions about whether it threatens LBTC itself or just exposed a serious operational failure. SideSwap PAK was able to allow for withdrawals, but the attacker's exploit path remains unclear due to approximately 4000 BTC having already been transferred using an apparently normal authorization process.