Liquid Network, a Layer-2 sidechain settlement network, suffered an unprecedented liquidity shock after 3,996 Bitcoin were withdrawn from its Federation peg wallet, wiping out approximately 95% of its 4,207 BTC reserve and leaving only 197 BTC. Bridge nodes were disabled, effectively pausing the network, while exchanges halted Liquid Bitcoin (LBTC) deposits and withdrawals. Assets other than Bitcoin remained unaffected, but prolonged disruption could weaken confidence in Liquid’s federation model. On a positive note, the diverted BTC was transferred to an address carrying a white-hat message, and operators stated that Federation keys were not compromised, leaving recovery possible.
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