Crypto World
What is liquidation in crypto? Health factors & more
Liquidation is the moment crypto’s leverage machinery takes your collateral, and it happens two very different ways: exchanges force-closing leveraged trades, and DeFi lending protocols auctioning borrowers’ collateral to keeper bots. This guide explains both systems, the health factor math, the bonus liquidators earn, why liquidations cascade into crashes, and how to read the daily liquidation numbers everyone quotes and few understand.
Summary
- Liquidation is crypto’s automated way of keeping leveraged systems solvent without identity, courts, or credit scores.
- Exchange liquidations force-close leveraged trades, while DeFi liquidations repay unhealthy loans by selling borrower collateral.
- In DeFi lending, the health factor is the core warning signal: above 1 is safe, below 1 is liquidatable.
- Liquidation cascades happen when forced selling pushes prices lower and triggers the next layer of leveraged positions.
- Daily liquidation totals are best read as positioning reports, not as direct predictions of future price direction.
On a single day this week, roughly $410 million of leveraged crypto positions were liquidated inside 24 hours, most of them longs, and the number scrolled past in headlines the way weather does. Days above a billion dollars are not rare; across 2025, more than $150 billion in positions were liquidated across venues. Liquidation is the most routine catastrophe in crypto, the mechanism by which every form of on-chain and exchange leverage enforces its one non-negotiable rule: the debt gets paid, and if you will not pay it, your collateral will.
What the headlines flatten is that liquidation in crypto is actually two distinct systems wearing one name. The first lives on derivatives exchanges, where leveraged perpetual-futures positions are force-closed when losses approach the trader’s margin. The second lives in DeFi lending protocols like Aave and Compound, where overcollateralized loans are enforced by an open market of bots, called keepers or liquidators, that repay underwater borrowers’ debts in exchange for their collateral at a discount. The two systems share a purpose, keeping lenders and venues solvent without trusting anyone, and differ in almost every mechanical detail, and understanding both is close to understanding how crypto’s entire credit machine holds together.
This guide covers the whole territory: why liquidation exists at all, the derivatives version in brief with its margin math and mark prices, the DeFi lending version in depth with health factors, thresholds, bonuses, and the keeper economy, the anatomy of a liquidation cascade, what the insurance funds and bad-debt backstops do when liquidation itself fails, and the practical playbook for keeping your own positions alive.
Why liquidation exists: solvency without trust
Every liquidation system answers the same question: how does a lender who cannot sue you, cannot call you, and does not know who you are make sure a loan gets repaid? Traditional finance answers with identity, courts, and credit scores. Crypto answers with overcollateralization and automation: you post more value than you borrow, and the moment the cushion between your collateral’s value and your debt shrinks toward zero, the system sells your collateral before the cushion is gone. Done correctly, the lender never takes a loss, because the sale happens while the collateral still covers the debt.
Everything else is implementation detail, and the details matter enormously. Liquidate too late and the protocol eats bad debt; liquidate too early and borrowers are punished for noise; misprice the collateral for one block and either error happens at scale. Liquidation design is where a credit system’s real risk decisions live, which is why it deserves more attention than the afterthought paragraph it usually gets.
Liquidation on exchanges: the derivatives version
On derivatives venues, liquidation is the endgame of leverage. A trader posts margin and opens a position several times that size; the exchange continuously marks the position against a manipulation-resistant mark price; and when losses erode the margin to the venue’s maintenance threshold, the engine seizes and closes the position. At 10x leverage a roughly 10 percent adverse move is fatal; at 50x, about 2 percent. The full mechanics, initial versus maintenance margin, mark versus index price, cross versus isolated margin, are covered in this publication’s perps guide, and two points from that machinery matter for what follows.
First, the mark price, an index-anchored, smoothed price, exists so that a momentary wick on one venue’s order book cannot liquidate everyone; you are liquidated against the market’s consensus price, not the last print. Second, when a position is so far underwater that closing it at market recovers less than the debt, exchanges reach for backstops: an insurance fund absorbs the shortfall, and if the fund is exhausted, auto-deleveraging forcibly closes profitable traders on the opposite side to balance the books, a mechanism that cost profitable traders over $50 million during one violent stretch in late 2025. Exchange liquidation, in other words, is a private matter between you and the venue’s risk engine, with socialized losses as the final resort.
Liquidation in DeFi lending: the health factor and the keepers
DeFi lending liquidation is a different animal, public, permissionless, and run by an open market of hunters, and it is the version most explanations skip.
Start with the loan. On a protocol like Aave, you deposit collateral, say ETH, and borrow against it, say USDC, up to a loan-to-value cap well below 100 percent. Each collateral asset carries a liquidation threshold, the LTV at which the position becomes seizable; for major assets this might sit around 80-83 percent, meaning a loan is safe while the debt stays below that fraction of the collateral’s value. The protocol compresses your entire position into one number, the health factor: the value of your collateral weighted by its liquidation thresholds, divided by your debt. Above 1, you are safe. At exactly 1, your position crosses the line. Below 1, anyone on earth may liquidate you.
And anyone does, because liquidation is a paid job. A liquidator repays some or all of your debt to the protocol and receives, in exchange, your collateral worth what they repaid plus a liquidation bonus, typically around 5 percent for major assets and more for volatile ones. Repay $10,000 of an unhealthy borrower’s USDC debt, receive roughly $10,500 of their ETH; the borrower’s remaining collateral shrinks by the bonus, which is the penalty they pay for crossing the line. Most protocols cap how much of a position can be liquidated in one bite, commonly 50 percent of the debt, called the close factor, so a borrower who dips just below 1 is partially liquidated back to health rather than wiped out, though deeply underwater positions can be fully seized.
The hunters are keeper bots: automated programs that watch every loan on every protocol, simulate health factors against live prices, and race to submit liquidation transactions the instant a position crosses 1. The race is ferocious, the bonus goes to whoever lands first, gas auctions and the private relays of the MEV supply chain decide winners by milliseconds, and the capital to repay the debt is very often flash-borrowed, so the entire operation, borrow the repayment, liquidate, sell the seized collateral, repay the flash loan, pocket the bonus, completes inside one atomic transaction. This is the part outsiders find alien: DeFi does not employ a risk department. It posts a bounty and lets mercenaries keep the system solvent, and it works, most of the time, better than the systems it replaced.
One number rules everything above: the price. Health factors are computed from oracle prices, so the entire lending-liquidation apparatus inherits the oracle’s integrity. A stale or manipulated feed liquidates healthy borrowers or spares doomed ones, and oracle failure is behind a large share of DeFi’s historical bad-debt events, which is why serious protocols use aggregated, median-filtered feeds and why borrowers should know which oracle guards their loan.
A worked example: one loan’s journey to liquidation
Numbers make the machinery concrete, so follow a single position from opening to seizure.
A borrower deposits 10 ETH as collateral with ETH at $1,800, collateral value $18,000, on a protocol where ETH carries an 82.5 percent liquidation threshold. They borrow 10,000 USDC, a 55.6 percent loan-to-value, comfortable territory. Their health factor at opening is the threshold-weighted collateral over debt: 18,000 times 0.825, divided by 10,000, equals 1.485. The position can absorb a meaningful drawdown; solving for the price at which the health factor hits 1 gives the liquidation price: debt divided by threshold divided by ETH quantity, 10,000 / 0.825 / 10, which is about $1,212. ETH must fall roughly 33 percent from entry before the keepers come.
Now the market delivers exactly that. ETH slides over two weeks to $1,250, health factor 1.03, and the borrower, watching, does nothing, reasoning the bounce is near. A weekend wick takes ETH to $1,195 for eleven minutes. At $1,212 the health factor crossed 1, and within a block or two a keeper acts: with a 50 percent close factor, it repays 5,000 USDC of the debt and, with a 5 percent bonus, claims $5,250 worth of ETH, about 4.39 ETH at the wick price. The borrower now holds 5.61 ETH backing 5,000 USDC of debt; the health factor resets to roughly 1.11, alive but poorer. The eleven-minute wick cost them $250 in bonus plus the spread on collateral sold at the local bottom, and if the fall had continued, subsequent liquidations could each take their bite until nothing remained.
The counterfactuals are the lesson. Repaying 2,000 USDC of debt at any point before the wick would have lifted the liquidation price to about $970, far below the wick; adding 2 ETH of collateral would have done similar work; and either action would have cost transaction fees measured in dollars against a penalty measured in hundreds. Liquidation almost never happens without a long, visible approach, the health factor decays in public, on-chain, for anyone to see, and the borrowers it takes are overwhelmingly the ones who watched it come.
The same arithmetic scaled up explains the professional side. A keeper repaying $5,000 for $5,250 earned 5 percent on capital deployed for one block, capital that was itself flash-borrowed, meaning the return on the keeper’s own funds, gas and infrastructure aside, approaches the absurd. That yield is the bounty that guarantees no unhealthy loan survives long, and competition for it is why the bounty has not needed to be larger.
Cascades: how liquidations become crashes
Liquidations do not just respond to price moves; past a threshold, they cause them, and the feedback loop is the mechanism behind many of crypto’s sharpest candles.
The anatomy is simple. A price drop pushes a tranche of leveraged positions past their liquidation points. Liquidation is executed by selling the collateral or closing the longs, which is sell pressure, which pushes the price lower, which liquidates the next tranche, which sells, and so on down the order book. Thin liquidity amplifies every leg, because each forced sale moves the price further, the slippage cost that large orders always pay becoming, in aggregate, the crash itself. The cascade ends where the leverage does: when the liquidatable positions are exhausted, the forced selling stops, and price frequently snaps back, leaving a wick that marks exactly how deep the leverage ran. Funding rates, open interest, and liquidation heatmaps let traders estimate where those clusters sit, which is why the derivatives data services publish liquidation maps and why sophisticated actors sometimes push price toward known clusters to set the dominoes off.
DeFi lending adds its own cascade variant with correlated collateral. When a widely used collateral asset depegs or gaps, every loan built on it sickens simultaneously; the 2022 stETH episode, where a liquid staking token’s discount stressed a leverage loop built on it, remains the canonical case study of one asset’s wobble propagating through lending markets as a synchronized health-factor collapse. The lesson generalizes: your liquidation risk is not just your own leverage but everyone else’s leverage in the same collateral.
When liquidation fails: bad debt and backstops
The system’s last chapter is what happens when selling the collateral does not cover the debt, because prices gapped too fast or liquidity vanished. On exchanges, the insurance fund pays, then auto-deleveraging conscripts the winners. In DeFi, the shortfall becomes bad debt on the protocol’s books, and each protocol has its own waterfall: reserve funds accumulated from fees, safety modules of staked tokens that can be slashed to cover deficits, or, historically and controversially, governance deciding who eats the loss. A protocol’s bad-debt record and backstop design are, alongside its oracle, the two lines of due diligence that matter more than its advertised yields, because they are the difference between a lender that survived its worst day and one that socialized it.
One structural nuance completes the lending picture: not all collateral is liquidated the same way. Fixed-bonus seizure of the kind in the worked example is the dominant design, but several protocols instead auction the collateral, Dutch auctions that start above market and decay until a keeper bites, which returns more value to borrowers in calm conditions and can struggle in chaos, as an infamous episode of zero-bid auctions during a 2020 crash proved when network congestion let liquidators win collateral for nothing. Auction versus fixed-bonus, close factors, per-asset thresholds, and oracle choice together form each protocol’s liquidation personality, and experienced borrowers read those parameters the way credit analysts read covenants, because they are the covenants.
Reading the liquidation tape like a professional
The daily liquidation statistics are among crypto’s most quoted and least understood numbers, and extracting their real information takes three habits.
First, read the ratio before the total. A $400 million day that is 63 percent longs says the market fell into a crowded long book; the same total at 85 percent shorts, like the recent session where Bitcoin short liquidations dominated on a squeeze higher, says the opposite: bears were crowded and the move ran them over. The skew identifies which side was overextended, which is the tradable information; the headline total mostly measures volatility times leverage.
Second, treat totals as minimums. Public figures aggregate what venues report, and reporting conventions differ, some exchanges publish only samples of liquidation events, so true forced-closure volume typically exceeds the printed number. Comparisons across time are still meaningful because the undercounting is roughly consistent; comparisons across venues are not.
Third, connect the tape to positioning data. Liquidations are the discharge; open interest and funding rates are the stored charge. Rising open interest with extreme funding is leverage accumulating on one side, the precondition for a cascade; a liquidation spike that coincides with an open-interest collapse means the leverage actually left the system, which is what durable local bottoms and tops are made of, whereas a spike that barely dents open interest means the crowd reloaded and the fuel remains. The heatmap services that estimate where liquidation clusters sit at each price complete the picture, showing the magnets that sharp moves gravitate toward.
None of this predicts direction on its own; all of it describes the terrain, and traders who read the terrain stop being surprised by which moves extend and which reverse violently at a wick.
Keeping your positions alive: the practical playbook
For a borrower or leveraged trader, all of the machinery above compresses into a few habits. Know your number: the liquidation price on a perp, the health factor on a loan, and the oracle both are computed from. Size for the gap, not the trend, because liquidation happens at the wick, not the close, and weekend and low-liquidity hours produce the worst wicks. Prefer isolated margin when experimenting, so one dead trade cannot drain an account, and keep a repayment buffer ready, since topping up collateral or repaying a slice of debt is dramatically cheaper than the liquidation bonus. Watch the crowd as well as yourself: extreme funding, ballooning open interest, and dense liquidation clusters near price are the weather report for cascades. And read the daily liquidation totals correctly: $410 million liquidated, 63 percent longs is not a death toll but a positioning report, telling you which side was crowded, how much leverage just left the system, and, often, why the price wicked exactly where it did.
Liquidation is easy to resent and hard to replace. It is the reason DeFi lending survived drawdowns that killed centralized lenders whose loan books ran on trust and phone calls, and the reason a perp exchange can offer 50x leverage to anonymous traders and remain solvent by Tuesday. The machine is impartial to the point of cruelty, it will take a sleeping borrower’s collateral over a five-minute wick, and its impartiality is precisely the property everything else is built on. The practical wisdom is old and short: the machine cannot be negotiated with, so stay out of its reach.
A closing word on the system’s deeper logic. Liquidation is crypto’s replacement for the entire apparatus of credit assessment, and the trade it makes is time for capital. A bank spends weeks deciding whether you will repay over years; a protocol spends no time at all deciding, demands surplus collateral instead, and enforces continuously. The design is capital-inefficient by construction, you must lock more than you borrow, and in exchange it achieves something credit systems never had: solvency that does not depend on being right about anyone. Every innovation in the space, cross-margin, isolated pools, dynamic thresholds, liquidation auctions that replace fixed bonuses with competitive bidding to return more value to borrowers, is an attempt to soften the capital inefficiency without surrendering the trustlessness, and the frontier of lending design is exactly that negotiation. Understanding liquidation is therefore not just self-defense for the leveraged; it is understanding the load-bearing wall of the whole on-chain credit system, the mechanism every yield, every stablecoin loan, and every leveraged position in DeFi quietly rests on. The wall holds because the machine is merciless, and the machine is merciless so that no one has to be trusted, which is, for better and worse, the entire proposition this industry was built to test.
And for readers who came to this piece from a headline, the translation service one last time: liquidations hit $X billion is not news that money vanished, most of it moved from the margin accounts of the crowded side to the other side of their trades, and it is not a prediction of anything. It is an after-action report on where leverage lived, published by the only market on earth candid enough to print its casualties in real time.
Disclaimer: This article is for educational purposes only and does not constitute investment advice. Leverage and DeFi lending carry significant risk, including total loss of collateral. Protocol parameters cited are typical values as of July 8, 2026, and vary by platform. Always do your own research.
Frequently asked questions
What is liquidation in crypto in simple terms?
Liquidation is the forced closure of a leveraged position or the forced sale of loan collateral when losses approach the point where the debt would no longer be covered. Exchanges liquidate leveraged trades through their risk engines; DeFi lending protocols let anyone repay an unhealthy borrower’s debt and claim their collateral at a discount. In both cases the purpose is the same: the lender or venue is made whole before the borrower’s cushion runs out.
What is a health factor?
The health factor is DeFi lending’s solvency score for a loan: collateral value, weighted by each asset’s liquidation threshold, divided by debt. Above 1, the loan is safe; below 1, it can be liquidated by anyone. It falls when collateral prices drop, debt grows through interest, or borrowed-asset prices rise, and borrowers restore it by adding collateral or repaying debt.
Who actually performs DeFi liquidations?
Automated programs called keepers or liquidator bots. They monitor every loan, and when a health factor crosses below 1 they race to repay the debt and claim the collateral plus a bonus, typically around 5 percent. The capital is often flash-borrowed so the whole operation completes in one transaction. It is a competitive, permissionless business, and the competition is what keeps protocols solvent without any central risk desk.
What is the liquidation penalty or bonus?
They are the same number seen from two sides. The liquidator receives collateral worth more than the debt they repay, commonly about 5 percent more for major assets, as payment for the service; the borrower loses that same amount from their collateral as the cost of crossing the line. Volatile or illiquid collateral carries larger bonuses because liquidating it is riskier.
Why do liquidations cause price crashes?
Because liquidation is executed by selling. A price drop triggers forced sales, which push the price lower, which triggers the next layer of forced sales, a feedback loop called a liquidation cascade. It ends when the clustered leverage is exhausted, which is why violent drops often end in a sharp wick and immediate partial recovery.
Can I lose more than my collateral?
In DeFi lending, no; the collateral is the full extent of your exposure, and any shortfall beyond it becomes the protocol’s bad debt. On derivatives venues, losses are normally capped at your margin, with insurance funds absorbing shortfalls, but certain products and cross-margin setups can allow deficits, so the venue’s terms are worth reading.
What is a partial liquidation?
Most lending protocols cap each liquidation at a fraction of the debt, often 50 percent, called the close factor. A borrower who slips just below health factor 1 is liquidated only enough to restore the position to safety, preserving the rest. Deeply unhealthy positions can be liquidated entirely. Exchanges similarly often reduce positions in steps before full closure.
How do I avoid being liquidated?
Use conservative leverage, monitor your liquidation price or health factor, and act before the line, since adding collateral or repaying debt costs far less than the penalty. Prefer isolated margin for risky trades, size positions for sudden wicks rather than average moves, avoid crowded trades signaled by extreme funding rates, and know which oracle prices your collateral, because your position lives and dies by its feed.
Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.
HashKey Exchange said it received approval to open client money accounts with JPMorgan, weeks after it launched customer fund accounts with DBS Bank.
The flaw allowing the exploit traces to a March 2021 firmware build that routed seed generation to a predictable software randomizer instead of the chip’s hardware one, leaving the resulting keys reproducible offline by anyone who works out the range. Coldcard manufacturer Coinkite released emergency firmware for every affected model and told users who had generated a seed on the flawed software to move funds to a wallet address made with a fresh one.
Thorn said he had no direct victim report and published his findings on pattern matching alone, choosing speed over confirmation to warn people while the transactions were still unconfirmed.
If it holds, however, the running total across four waves had reached about 1,816 bitcoin, near $114 million, from more than 5,200 addresses since July 30.
Thorn advised users to check funds, move anything off an affected device and bid the fee up.
The pattern covered blocks 960,778 to 960,792, with 218 transactions hitting 462 victim addresses at a rate of about 14 sweeps per block against 0.3 in a pre-incident control window, roughly 45 times normal.
Each of the spent coins that arrived after the Coldcard firmware boundary, and the destinations were fresh addresses with no prior history, one per victim rather than the shared collectors that made the first two waves easy to map.
Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.
Learn how to choose the best crypto payment gateway for businesses by comparing settlement, compliance, integrations, automation, and fees in 2026.
Companies serving international customers, digital-first audiences, or markets with limited card and bank transfer coverage may use crypto payments to fill the gap. A crypto payment gateway allows a business to accept crypto payments without building blockchain infrastructure internally. The provider can generate addresses, monitor confirmations, convert assets, screen transactions, and route settlements. The key question in 2026 is which provider can support the required assets, jurisdictions, settlement model, compliance process, and volume.
What defines the best crypto payment gateway for businesses?
The best crypto payment gateway for businesses depends on how the payment flow is expected to work.
Supported cryptocurrencies determine which assets customers can use, while blockchain coverage determines the available networks. The same stablecoin may operate on several blockchains with different fees and confirmation times.
The next question is what happens after payment. Some businesses retain crypto, while others convert it into stablecoins or fiat. Settlement options and automatic conversion should therefore be reviewed together. Auto-conversion can reduce volatility exposure and manual exchange work, while fiat settlement can simplify accounting and treasury management. However, availability may depend on the provider, jurisdiction, banking partners, and compliance checks.
Businesses must also decide how the gateway will connect with existing systems through an API, hosted checkout, or payment links. An API provides greater control over checkout logic and transaction handling, while hosted checkout reduces development work. Payment links support invoices and direct sales that do not require a conventional online store. Webhooks complement these methods by sending updates when a transaction is confirmed, underpaid, expired, or refunded.
Security and compliance determine whether the gateway fits internal policies. Relevant controls include KYB onboarding, AML screening, access permissions, withdrawal allowlists, transaction monitoring, and audit records. Transaction histories, exports, and reconciliation reports also reduce manual interpretation of blockchain records.
Finally, businesses need to assess reliability and total cost. Uptime and support affect payment continuity, while a headline fee may exclude blockchain charges, conversion fees, payouts, or fiat withdrawals. Providers should therefore be compared across the complete payment and settlement flow.
Comparison of leading crypto payment gateways
| Provider | Best suited for | Supported crypto | API | Fiat settlement | Auto-conversion |
| PassimPay | International digital businesses requiring multi-chain payments, automation, and several collection or payout methods | 74+ | Yes | Yes | Yes |
| CoinGate | Merchants seeking an established checkout ecosystem, major assets, e-commerce plugins, and scheduled settlement | 10+ core assets | Yes | EUR, GBP, and USD | Yes |
| NOWPayments | Projects prioritizing broad asset coverage, flexible integrations, subscriptions, or mass payouts | 350+ | Yes | Available through fiat processing and withdrawal tools | Yes |
| CryptoProcessing by CoinsPaid | Larger organizations requiring managed payment infrastructure, permanent deposit addresses, exchanges, and batch payouts | 20+ | Yes | Crypto-to-fiat exchange and bank withdrawal | Yes |
The table reflects publicly available product information. Exact availability can vary by jurisdiction, asset, network, account type, and onboarding outcome.
PassimPay overview
PassimPay combines payment acceptance, fund management, conversion, and payout tools in one crypto payment solution. The platform supports more than 74 cryptocurrencies across over 18 blockchains and is available in 122 countries.
Businesses can integrate through a Payment API or use Hosted Checkout when a ready-made interface is more suitable. Payment Links support remote billing, while Static Deposit Wallets provide reusable addresses for account-based deposits. Webhooks connect transaction events with merchant systems.
Beyond incoming payments, Mass Payouts and Batch Transactions support transfers to multiple recipients. Auto Conversion can move received assets into another supported currency, while Fiat Settlement provides an off-ramp for companies that do not want to retain all revenue in crypto. The Merchant Portal includes Transaction History and Reports for tracking and reconciliation.
PassimPay also provides AML Screening, checkout customization, and payment monitoring. It has more than 530 merchants, over 750,000 monthly transactions, more than $4 billion processed, and 99.99% uptime. Fees start at 0.5%, although the final cost depends on the services and transaction flow used.
This feature set suits SaaS, gaming, AI, hosting, e-commerce, and other digital services that need multi-market payments, user deposits, automated updates, conversion, or recurring payouts.
When different providers may fit different business needs
CoinGate may fit companies that value an established merchant ecosystem, e-commerce integrations, core cryptocurrency support, and settlement in major fiat currencies. Its standard plan lists a 1% processing fee and weekly automatic settlement.
NOWPayments may suit projects that prioritize asset breadth. It supports more than 350 cryptocurrencies, API-based payments, subscriptions, payment buttons, custody options, mass payouts, and auto-conversion. Its published service fee is 0.5% for single-currency payments and 1% when conversion is required.
CryptoProcessing by CoinsPaid may fit enterprise-oriented operations that need permanent deposit addresses, payment links, internal exchanges, mass payouts, e-commerce plugins, and crypto-to-fiat withdrawal. Its documentation lists support for more than 20 cryptocurrencies.
PassimPay may fit companies that need multi-chain coverage together with hosted payments, static wallets, automated conversion, fiat settlement, reporting, and payout functions. The final decision depends on the assets, networks, countries, controls, and settlement routes required by the business model.
Conclusion
Selecting the best crypto payment gateway for businesses requires more than comparing supported coins. Companies need to assess integration depth, blockchain coverage, settlement currencies, compliance controls, reporting, uptime, support, and total processing costs.
CoinGate, NOWPayments, CryptoProcessing by CoinsPaid, and PassimPay address different operational priorities. PassimPay stands among the more functionally complete options in this group for international digital businesses requiring multi-chain acceptance, automated fund management, and both collection and payout tools. Still, the appropriate provider is the one that matches the company’s payment flow, risk policy, technical resources, and settlement requirements.
Disclosure: This content is provided by a third party. Neither crypto.news nor the author of this article endorses any product mentioned on this page. Users should conduct their own research before taking any action related to the company.
The Coldcard exploit is not a hack in the way most people understand the word. Nobody broke into anything. Nobody phished anyone. Nobody stole a seed phrase from a sticky note. The devices generated weak private keys for five years, and an attacker figured out how to guess them.
Summary
- Four coordinated attack waves have drained an estimated 1,816 BTC (approximately $118 million) from Coldcard hardware wallets since July 30, with Galaxy Research tracking 5,294 affected addresses and warning that every vulnerable device will eventually be emptied.
- The exploit stems from a firmware build error present since March 2021 that reduced seed entropy from 128 bits to approximately 40 bits on Mk3 devices and 72 bits on Mk4/Mk5/Q models, making private keys guessable through brute force.
- Unlike the FTX collapse, which drove bitcoin off exchanges into self-custody, the Coldcard crisis is producing the opposite flow: users are moving bitcoin back to regulated exchanges and institutional custodians they previously abandoned.
- The net transfer of bitcoin from self-custody wallets to exchange addresses has been positive every day since July 31 according to on-chain flow data, reversing a two-year trend that began after FTX.
- Treasury companies that hold bitcoin through institutional custody, including Strategy and prospective entrants like Evernorth, benefit from a narrative shift that frames self-custody as a risk rather than a solution.
That distinction matters because it strikes at the foundation of the self-custody argument. The pitch for hardware wallets has always been simple: your keys, your coins, no counterparty risk. Coldcard was the gold standard of that philosophy. Air-gapped, open-source, bitcoin-only, endorsed by security researchers and institutional custodians as the most trusted device in the ecosystem.
If the most trusted hardware wallet can ship a five-year entropy bug without detection, the question is no longer whether Coldcard failed. The question is whether any hardware wallet can be trusted as the sole custodial layer for significant bitcoin holdings. And the market is answering that question with its feet.
The exploit in four waves
The first wave hit at 2:14 a.m. UTC on July 30. A single entity swept 594 BTC from approximately 500 wallets in 25 minutes. The second wave followed on August 1, draining 284.4 BTC from 2,889 addresses. The third wave hit later that day with 207.73 BTC across a separate address cluster. The fourth wave arrived on August 3, with Galaxy Research’s Alex Thorn identifying 448.7 BTC moving from 709 suspected victim addresses.
The combined estimate stands at approximately 1,816 BTC across 5,294 addresses. Galaxy measures 13.8 sweeps per block during active waves, roughly 45 times the baseline rate. Thorn described the pattern as “LIKELY Coldcard victims” based on unspent output characteristics and transaction behavior. The wording is precise because the attribution comes from blockchain analysis, not device records or law enforcement confirmation.
Coinkite, the Toronto-based manufacturer, traced the problem to a March 2021 firmware change. A preprocessor guard was supposed to select the hardware random-number generator during seed creation. The guard checked whether a configuration setting was defined, not whether its value was correct. The build system selected a deterministic MicroPython fallback instead. The firmware compiled without warnings. Seeds appeared normal. Addresses accepted deposits. Nothing indicated the entropy was catastrophically weak.
On Mk3 devices, the effective search space dropped to approximately 40 bits. A 128-bit seed has more possible combinations than atoms in the observable universe. A 40-bit seed has roughly one trillion combinations. That is within reach of commodity hardware. The Mk4, Mk5, and Q models include additional secure elements that mix their own entropy, producing seeds with approximately 72 bits. Better than 40, but still far below the 128-bit target.
The critical detail: updating the firmware does not repair an existing seed. Every Coldcard owner who generated a seed on affected firmware must create a new seed on patched hardware and migrate their funds. The key itself must be replaced.
The flow reversal: from exchanges to self-custody and back
After FTX collapsed in November 2022, the bitcoin community experienced its most dramatic shift in custodial philosophy. The phrase “not your keys, not your coins” became operational advice rather than a slogan. On-chain data showed a sustained, multi-month transfer of bitcoin from exchange addresses to self-custody wallets. The trend persisted for nearly two years.
The Coldcard exploit has reversed that flow. Net transfers from self-custody wallets to exchange addresses have been positive every day since July 31. The magnitude is not comparable to the post-FTX exodus, which involved hundreds of thousands of BTC over months. The current flow is smaller and more concentrated among users who specifically held Coldcard devices. But the direction of the flow is what matters for the narrative.
The users moving bitcoin to exchanges are not panicking retail investors. Many are technically sophisticated holders who chose Coldcard specifically because it was the most security-conscious option. They are making a rational calculation: the counterparty risk of an exchange is now quantifiable and insured, while the self-custody risk of a hardware wallet with a five-year entropy bug is neither.
That calculation is the narrative shift. Self-custody was supposed to eliminate counterparty risk entirely. The Coldcard exploit demonstrates that self-custody introduces its own category of risk: supply-chain risk, firmware risk, entropy risk, and the risk that the device you trust with your private keys is not doing what its manufacturer claims.
Who benefits: the treasury company model
The companies that hold bitcoin through institutional custody benefit directly from the narrative shift. Strategy, the largest corporate holder with over 550,000 BTC as of its latest disclosure, uses institutional custodians including Coinbase Custody and Fidelity Digital Assets. These custodians use multi-signature arrangements, hardware security modules, and geographic distribution that do not depend on any single device’s entropy quality.
The treasury company thesis is built on the argument that holding bitcoin through a publicly traded company is safer than holding it yourself, more liquid than holding it in a hardware wallet, and more capital-efficient because the company can borrow against its holdings. The Coldcard exploit strengthens the first claim in a way that no marketing campaign could.
Evernorth, the XRP treasury company preparing to list, faces a similar dynamic. Prospective investors who might have preferred self-custody of XRP now have a concrete example of what can go wrong with hardware wallet security. The listing calculus shifts when self-custody carries visible, quantifiable risk.
The broader pattern extends to every institutional custody provider. Coinbase Custody, BitGo, Fireblocks, and Anchorage reported inquiries surging after the first Coldcard wave. The product these companies sell is the elimination of exactly the risk that Coldcard exposed: the risk that a hardware implementation error, invisible for years, can make your private keys guessable.
The insurance gap and what it reveals
The Coldcard exploit has exposed an insurance gap that the industry has not addressed. Regulated exchanges and custodians carry insurance against theft, operational failure, and in some cases, hot-wallet compromise. The coverage limits vary, but the principle is established: if an exchange loses your bitcoin through its own failure, there is a claims process.
Self-custody has no equivalent. If a hardware wallet generates a weak key and an attacker drains the funds, the user has no insurance claim. Coinkite is a private company in Toronto. No product liability framework for hardware wallet entropy failures exists. The affected users can sue, but collecting meaningful damages from a hardware startup is a different proposition from filing a claim against an insured custodian.
The insurance gap is not a new observation, but the Coldcard exploit makes it concrete. A user who lost 10 BTC from a Coldcard has no recovery mechanism. A user who lost 10 BTC from Coinbase Custody would have a claim against the custodian’s insurance. The risk-adjusted comparison now favors institutional custody for any holding above the threshold where insurance matters.
The AI dimension and what it means for future exploits
Coinkite said the attacker used AI to discover the firmware flaw, and that Coinkite’s own AI audit of the same code weeks earlier found nothing. If that assessment is correct, it introduces a new variable into the self-custody risk model.
Hardware wallet security has historically rested on the assumption that open-source code is safer because more eyes can review it. The Coldcard firmware was public for five years. Thousands of developers could have inspected it. Nobody found the entropy bug. An AI model did.
The implication is that the advantage in firmware analysis has shifted from defenders to attackers. If AI can find subtle build-system errors that human reviewers miss, then every open-source hardware wallet is potentially vulnerable to the same methodology. The attacker does not need to find a new type of bug. They need to find a new instance of the same type of bug in a different codebase.
Block, Trezor, and Ledger have confirmed their products are unaffected by the specific Coldcard vulnerability. But “unaffected by this specific bug” is not the same as “provably secure against AI-assisted firmware analysis.” The assurance gap is structural, and the Coldcard exploit is the first public demonstration of it.
The self-custody argument is not dead, but it is wounded
The self-custody philosophy will survive the Coldcard exploit. Multi-signature arrangements that do not depend on any single device, hardware wallets from manufacturers with different codebases, and cold storage practices that incorporate dice rolls for entropy remain valid approaches. Coinkite itself noted that seeds created with at least 50 fair dice rolls are not considered exposed by this RNG issue.
What the exploit has damaged is the simplest version of the self-custody argument: buy a hardware wallet, generate a seed, store it safely, and never worry about counterparty risk again. That version assumed the hardware wallet worked as advertised. For five years, Coldcard did not.
The result is a more nuanced custody landscape. Self-custody for small amounts remains practical. Self-custody for significant holdings now requires either multi-signature setups, multiple hardware vendors, external entropy sources, or regular security audits that most individual holders cannot perform. For holders who cannot or will not take those steps, institutional custody has become the lower-risk option. And that is exactly the argument the treasury companies have been making all along.
What to watch
- Exchange inflow data. If the net transfer from self-custody to exchanges continues beyond the initial Coldcard panic, it signals a durable shift in custody preferences rather than a temporary reaction.
- Coinkite’s liability exposure. Any class-action filing against Coinkite will establish precedent for hardware wallet manufacturer liability. Watch for suits in US and Canadian courts.
- Institutional custodian onboarding numbers. Coinbase Custody, BitGo, and Fireblocks quarterly reports will show whether the Coldcard exploit translated into sustained new business.
- Strategy and Evernorth share price behavior. If treasury company stocks outperform bitcoin in August, the market is pricing the custody-narrative shift into equities.
- New firmware audit disclosures. If other hardware wallet manufacturers commission independent AI-assisted audits and publish results, it signals the industry is taking the supply-chain risk seriously.
Frequently asked questions
How much bitcoin has been stolen from Coldcard wallets?
Galaxy Research estimates approximately 1,816 BTC across four coordinated attack waves affecting 5,294 addresses since July 30. The figure is based on blockchain analysis and has not been confirmed by Coinkite or law enforcement.
Is the Coldcard exploit still ongoing?
Yes. Galaxy identified the fourth wave on August 3 and warned that vulnerable seeds will continue to be drained until affected users migrate to new wallets with fresh seeds on patched firmware.
Does updating Coldcard firmware fix the problem?
No. The firmware update fixes seed generation going forward, but it does not repair seeds already created on vulnerable firmware. Users must generate entirely new seeds and transfer their funds.
Are other hardware wallets affected?
Block, Trezor, and Ledger have confirmed their products are not affected by this specific vulnerability. However, the exploit demonstrates that firmware-level entropy bugs can persist undetected for years in any open-source codebase.
Why are people moving bitcoin to exchanges instead of other hardware wallets?
Regulated exchanges and custodians offer insurance, multi-signature security, and professional monitoring that individual hardware wallets do not. The Coldcard exploit made self-custody risk visible and quantifiable, changing the risk comparison.
Do treasury companies like Strategy use hardware wallets?
Strategy and other institutional holders use professional custodians like Coinbase Custody and Fidelity Digital Assets, which employ multi-signature arrangements and hardware security modules rather than single consumer hardware wallets.
Can affected users recover stolen bitcoin?
Recovery is extremely unlikely. The attacker controls the private keys. Bitcoin transactions are irreversible. Users with unconfirmed transactions may attempt Replace-by-Fee to redirect funds, but this window is narrow and not guaranteed.
Is self-custody still safe?
Self-custody remains viable with proper practices: multi-signature setups across multiple hardware vendors, external entropy from dice rolls, and regular security audits. Single-device, single-signature self-custody for significant holdings now carries documented risk.
Disclaimer: This article is for informational purposes only and does not constitute financial, investment, or legal advice. Loss estimates are based on third-party blockchain analysis and have not been confirmed by the manufacturer or law enforcement. Published August 3, 2026.
Bitcoin slipped below $63,000 on Monday, Aug. 3, even as falling oil prices and stronger U.S. stock futures created a more favorable backdrop for risk assets.
Summary
- Bitcoin fell below $63,000 while oil and Treasury yields declined on renewed Iran diplomacy hopes.
- Coldcard attack estimates now exceed 1,815 BTC across more than 5,000 suspected victim addresses overall.
- Spot Bitcoin ETFs lost $61.53 million last week, ending three consecutive weeks of net inflows.
- Strategy added Bitcoin’s 200 week average as prices hovered only modestly above the indicator Monday.
- A Senate delay left the CLARITY Act without scheduled floor action before the August recess.
BTC traded near $62,556, down 1.38% over 24 hours and 4.35% over seven days. It had reached a Sunday high near $63,650 before sellers regained control. Ether fell about 1.8% to $1,841, while XRP and Solana also declined.
The weakness came as investors assessed renewed U.S. talks with Iran, another suspected Coldcard attack wave, fresh spot Bitcoin ETF outflows and the absence of the CLARITY Act from Monday’s Senate schedule.
Bitcoin price fails to follow the broader relief trade
President Donald Trump canceled a planned military strike on Iran and said negotiations would seek to address Iran’s nuclear program and reopen the Strait of Hormuz. Brent crude fell to about $83.28 per barrel, while West Texas Intermediate dropped to $79.47.
Nasdaq futures rose about 0.8%, while S&P 500 futures gained 0.6%. Treasury prices also strengthened as lower oil reduced some of the inflation concerns created by disrupted energy supplies.
Bitcoin did not follow that move. The divergence does not prove that one crypto event caused the decline. However, it shows that lower oil and stronger equity futures were not enough to overcome the pressures already affecting digital assets.
The relative weakness is consistent with a possible rotation of speculative capital toward technology stocks. Price action alone cannot confirm that movement, but renewed activity in equities can reduce demand for crypto when traders have several competing sources of volatility.
Coldcard losses keep security fears in focus
Galaxy Research head Alex Thorn identified what he described as a “LIKELY” fourth organized wave affecting Coldcard generated addresses. His updated estimate covered 709 potential victim addresses and 448.7 BTC. Activity reached 13.8 sweeps per Bitcoin block, about 45 times the rate measured during an earlier control period.
Galaxy had previously mapped three suspected waves involving 1,367.05 BTC across 4,585 addresses. Adding the latest estimate produces a possible total of 1,815.75 BTC across 5,294 addresses, assuming the groups contain no overlap.
That total remains an onchain estimate. Coinkite, law enforcement agencies and individual wallet owners have not independently confirmed every address as a victim. Galaxy has also not established whether one attacker controlled all four waves.
The incident concerns seed generation in affected Coldcard firmware rather than a failure in Bitcoin’s network or transaction cryptography. Coinkite said some devices created seeds with less randomness than intended, allowing attackers to search a smaller range of possible keys.
Coinkite has released corrected firmware for each affected model. However, installing an update does not repair an existing vulnerable seed. Users must generate a new seed with corrected firmware and transfer their funds. The company said its investigation remains ongoing.
As crypto.news previously reported, Thorn also identified similar transactions waiting in the mempool. Some users may be able to replace an unconfirmed attacker transaction with a higher fee transfer, although success is “not guaranteed.”
ETF outflows and the CLARITY delay add pressure
U.S. spot Bitcoin ETFs recorded about $61.5 million in net outflows from July 27 through July 31, based on SoSoValue data. The result ended three consecutive weeks of net inflows.
The final session caused most of the weekly reversal. Funds lost a combined $265.4 million on July 31. BlackRock’s IBIT recorded $122.7 million in withdrawals, while Fidelity’s FBTC lost $54.8 million and Grayscale’s GBTC posted $52.6 million in outflows.
The flows do not show whether investors expect further price declines. They do show that regulated fund demand weakened as Bitcoin moved closer to long term support.
Political uncertainty added another concern. Monday’s official Senate schedule included a vote on a spending measure but no action on the Digital Asset Market Clarity Act. The chamber’s published cloture records also showed no petition for the legislation.
As crypto.news reported, leaders would ordinarily need to file cloture by Wednesday, Aug. 5, to hold a possible Friday vote on proceeding to the bill. Such a vote would not constitute final passage.
The absence of scheduled action cannot be identified as the direct cause of Bitcoin’s decline. Still, it removes a possible near term policy catalyst while traders await a clearer Senate timetable.
Bitcoin price now faces a $60,000 support test
The supplied daily chart shows Bitcoin struggling below the $63,000 to $65,000 range. Momentum has weakened, with the relative strength index at 42.65 and below its moving average of 50.40.
The MACD histogram has also turned negative. A sustained move below $60,000 would weaken the current structure, while a recovery above $65,000 to $66,000 would provide stronger evidence that buyers have regained control.
Strategy founder Michael Saylor said the company had begun tracking Bitcoin’s 200 week moving average and its premium to that level. He said Bitcoin had remained above the average 92% of the time since the indicator became available. The percentage reflects Strategy’s calculation rather than an independent market study.
The next checkpoints are Coldcard’s technical review, Monday’s ETF flows and any Senate filing before Wednesday. Until those pressures ease, lower oil prices and stronger stock futures may remain insufficient to produce a lasting Bitcoin rebound.
Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.
Nasdaq-listed crypto treasury company ZeroStack has raised serious questions about its financial runway, warning in a recent SEC filing that “substantial doubt” exists about whether it can keep operating for the next year. The assessment marks a sharp reversal from its view just a quarter earlier, highlighting how dependent the company’s plan is on staking income and the liquidity of its Zero Gravity (0G) token.
In a Form 10-Q filed with the U.S. Securities and Exchange Commission on Friday, ZeroStack reported $2.6 million in cash and negative working capital of $600,000 as of June 30, along with an accumulated deficit of $339.1 million. The filing also detailed a major unrealized drag from its token treasury: an $82.5 million fair value loss on digital assets and a net loss of $61.3 million for the first half of 2026.
Key takeaways
- ZeroStack now says there is substantial doubt it can continue operating over the next year, reversing its earlier “sufficient” outlook in a prior filing.
- As of June 30, the company held 75.1 million 0G tokens, valued at $15.2 million versus an aggregate cost of $163.3 million (about 91% below recorded cost).
- The company relies on staking rewards and sales of 0G tokens to fund operations, making its cash position sensitive to token price and trading liquidity.
- ZeroStack reported $3.8 million in staking revenue in the first half of 2026, but it also recorded significant losses and could not conclude that its planned funding steps fully remove going-concern risk.
SEC filing flags going-concern risk
ZeroStack’s latest filing is notable not just for its headline loss figures, but for the governance and risk signal it sends to investors. Management stated that it could not conclude its plans would be enough to eliminate doubts about whether the company can continue as a going concern over the next year.
The company’s balance sheet underscores the pressure behind that conclusion. With $2.6 million in cash and negative working capital of $600,000 at June 30, ZeroStack’s near-term flexibility appears limited. It also reported an accumulated deficit of $339.1 million, reflecting losses that have compounded over time.
Beyond liquidity, the filing shows the company is carrying a large unrealized impairment in its digital asset treasury. ZeroStack disclosed an $82.5 million fair value loss on digital assets during the period, alongside a net loss of $61.3 million for the first half of 2026.
A treasury strategy tied to 0G’s market
ZeroStack’s operating model depends heavily on 0G token performance and the token’s market depth. The company reported that it holds 75.1 million 0G tokens with an aggregate cost of $163.3 million and a fair value of $15.2 million as of June 30. Put differently, the holdings were valued about 91% below their recorded costs.
That gap matters for both accounting and funding. If the company intends to finance operations through token sales—especially during periods of weak liquidity—its ability to raise cash could be constrained even if balances appear large on paper. The company explicitly linked its funding capacity to both the 0G price and trading liquidity, according to the filing.
ZeroStack’s management also described reliance on staking rewards and token sales. In practice, staking income can provide periodic cash flow, but it may not be sufficient in periods when token markets are illiquid or when valuations fall further.
Staking revenue helps—yet the runway question remains
During the first half of 2026, ZeroStack reported $3.8 million in staking revenue. After validator commissions, the company said it earned about 6.6 million 0G tokens from staking activity.
To support expenses, ZeroStack sold nearly 4.9 million 0G tokens for $2.4 million over the same period. The filing indicates that these cash inflows—staking-related and sale-related—are central to its ability to pay forecast operating costs.
ZeroStack also said that, if needed, it could sell some of its treasury holdings. However, management’s conclusion did not fully reassure the markets: it said it could not determine that those actions would be enough to address going-concern doubts.
The tension here is straightforward. When a company’s main treasury assets have experienced steep valuation declines, the theoretical ability to raise cash by selling holdings can become less effective in the real world—particularly if market pricing and liquidity do not support the volume and proceeds management may be counting on.
Backtracking from earlier filings
Perhaps the most consequential element of the news is the reversal in ZeroStack’s assessment. In its first-quarter Form 10-Q filing, the company stated that its cash and staking rewards would be sufficient to meet its working capital requirements and obligations for at least another year.
In the most recent filing, it no longer reaches that conclusion and instead flags substantial doubt about continued operations over the next year. The shift suggests that circumstances changed—or that management’s confidence in the sustainability of its funding plan weakened as results and valuations evolved.
ZeroStack’s corporate background also provides context for how the company arrived at this point. The filing notes that the company was previously Flora Growth, a cannabis and CBD products firm. On Sept. 19, Flora announced $401 million in funding for a 0G treasury strategy, including $35 million in cash and equivalent commitments and more than $366 million in in-kind digital assets. The company later rebranded as ZeroStack and retained its Nasdaq listing.
Those details underline why investors are likely to focus on token treasury outcomes: the strategy is fundamentally designed to monetize staking and manage liquidity through sales. When 0G’s fair value diverges sharply from recorded cost, the difference can translate into both accounting losses and real constraints on financing flexibility.
What readers should watch next is whether ZeroStack provides further clarity on how it plans to balance staking, token sales, and liquidity needs—particularly given its much narrower margin for error after the “substantial doubt” disclosure. Investors will also likely track changes in 0G trading conditions, since the company’s own filings tie its funding outlook directly to token price and market liquidity.
Ripple has expanded its digital capital markets strategy. The company announced today investments in Zilo and Lucuido – two firms that are focused on developing infrastructure for tokenized funds and institutional asset trading.
The move builds on existing partnerships with both firms. Ripple did not disclose the size of either investment.
Speaking on the matter was Nigel Khakoo, SVP, Trading and Markets at Ripple, who said:
“… ZILO and Licuido provide core capabilities that are essential to further scaling this shift: regulated digital transfer agency infrastructure and liquidity for issuance and collateral mobility. This is just the beginning of the journey, and we see a substantial opportunity to bring huge efficiencies to the investment sector over the next decade.”
ZILO provides transfer agency and fund administration technology. Its systems give asset managers and custodians regulated digital records for tokenized share classes. Licuido, on the other hand, operates an FCA-regulated platform that supports the issuance, distribution, trading, and use of traditional assets as digital collateral.
Ripple plans to integrate these capabilities with its infrastructure on the XRP Ledger. The company wants institutions to issue tokenized assets, hold them in custody, move them between investors, and use them as collateral without relying on legacy systems.
Naturally, RLUSD will serve as the regulated cash component for delivery-versus-payment transactions. This structure is designed to allow the asset and payment sides of a trade to settle together on XRPL.
The investments also support Ripple’s recent push to build a broader institutional platform around tokenization, payments, stablecoins, and trading. Last month, the firm launched Ripple Mint and made an investment in compliance provider Notabene. This strengthens the infrastructure that’s available to institutions using RLUSD.
It’s also noteworthy that the company has worked with Aviva Investors, Franklin Templeton, and DBS on tokenized fund and collateral projects. Ripple said that ZILO and Licuido will help turn those individual partnerships into infrastructure that asset managers can use at scale.
The post Important Ripple (XRP) Announcement, New Investments: August 3 appeared first on CryptoPotato.
The crypto exchange stopped accepting new registrations from Japan residents and will begin progressively restricting existing accounts on Nov. 1.
ZeroStack has warned its cash position may not support operations for another year.
Summary
- ZeroStack has warned that substantial doubt exists about its ability to continue operating over the next year after reversing its earlier liquidity outlook.
- The company reported $2.6 million in cash while its 75.1 million 0G token treasury was valued about 91% below its acquisition cost as of June 30.
- ZeroStack said staking rewards and token sales remain its main funding sources, but management could not conclude those plans would remove the going concern risk.
- The latest filing comes months after CEO Daniel Reis Faria said regulatory uncertainty continued to keep larger institutional investors on the sidelines.
According to a Form 10-Q filed with the U.S. Securities and Exchange Commission on Friday, Nasdaq-listed crypto treasury company ZeroStack said substantial doubt exists about its ability to continue as a going concern over the next 12 months, reversing the conclusion it reached in its previous quarterly filings.
As of June 30, the company reported $2.6 million in cash, negative working capital of $600,000, and an accumulated deficit of $339.1 million. During the first half of 2026, it recorded an $82.5 million fair value loss on digital assets and a net loss of $61.3 million, according to the filing.
Management said existing cash, proceeds from staking rewards, and possible sales of treasury assets are expected to support operating costs. Even so, the company concluded it could not determine that those measures would remove the substantial doubt surrounding its ability to continue operating for the next year.
ZeroStack’s 0G treasury has lost most of its recorded value
The filing showed ZeroStack held 75.1 million Zero Gravity (0G) tokens with an aggregate acquisition cost of $163.3 million. Their fair value had fallen to $15.2 million by June 30, leaving the treasury valued about 91% below its recorded cost.
The company said its operating model depends largely on staking rewards and periodic token sales, making its access to cash dependent on both the market price and trading liquidity of the 0G token.
For the first six months of the year, ZeroStack generated $3.8 million in staking revenue after earning about 6.6 million 0G tokens following validator commissions. Over the same period, it sold nearly 4.9 million tokens for $2.4 million to cover operating expenses.
Although management said additional treasury sales remain available if needed, the filing stated that those plans were not sufficient to conclude that the going concern uncertainty had been resolved.
Filing reverses the company’s earlier liquidity outlook
The latest assessment differs from the position ZeroStack presented just three months earlier.
In its first-quarter filing, the company said available cash together with expected staking rewards would be enough to meet working capital needs and other obligations for at least the following 12 months. The latest report withdraws that conclusion after a sharp decline in the value of its digital asset holdings.
ZeroStack adopted its current treasury strategy after operating for years as cannabis and CBD products company Flora Growth.
On Sept. 19, the company announced a $401 million financing package to establish a treasury focused on the Zero Gravity ecosystem. The package included $35 million in cash and cash-equivalent commitments alongside more than $366 million in in-kind digital asset contributions. Flora Growth later rebranded as ZeroStack while retaining its Nasdaq listing.
ZeroStack CEO previously pointed to regulation as another institutional hurdle
The company’s financial disclosure comes months after ZeroStack Chief Executive Officer Daniel Reis-Faria discussed another challenge facing digital asset companies: regulatory uncertainty.
Speaking to crypto.news in May, Reis-Faria said progress on U.S. stablecoin legislation had reduced one source of uncertainty for investors but had not yet convinced larger institutions to increase participation.
His comments followed a bipartisan agreement between Senators Thom Tillis and Angela Alsobrooks on stablecoin provisions in the CLARITY Act that prohibited interest-like payments resembling bank deposits while allowing activity-based rewards tied to payments and platform use.
At the time, Reis-Faria said the remaining concern was not the legislation itself but uncertainty over how regulators would implement it. Under the proposal, the SEC, CFTC and Treasury would jointly develop implementing rules within one year after the legislation became law.
JPMorgan had previously described passage of the CLARITY Act by midyear as a positive catalyst for digital asset markets, while Blockchain Association CEO Summer Mersinger said resolving the stablecoin yield debate moved comprehensive market structure legislation closer to becoming law.
Standard Chartered also estimated that allowing unrestricted stablecoin yields could redirect as much as $500 billion in bank deposits by 2028, providing context for the banking industry’s resistance during negotiations.
Company now faces both market and funding pressure
The SEC filing indicates that ZeroStack’s operating cash generation remains closely tied to the performance of the 0G ecosystem through staking income and token sales.
With the market value of its treasury declining substantially from its acquisition cost, management said future liquidity will continue to depend on available cash, staking rewards, token prices, and market liquidity.
Despite outlining those funding options, the company concluded that substantial doubt about its ability to continue as a going concern remains in place for the coming year.
Galaxy Research head Alex Thorn warned early Monday that a fourth coordinated attack wave is likely targeting Coldcard users.
The random number generator (RNG) exploit has been linked to 1,367.05 Bitcoin (BTC) from 4,585 addresses across three confirmed waves. A verified fourth wave would push totals higher.
Coldcard Exploit Deepens as Suspected Fourth Wave Sweeps Over 380 Bitcoin
Thorn identified 218 transactions between blocks 960,778 and 960,792, moving over 380 BTC from 462 suspected victim addresses to 210 fresh destinations. Sweeps ran at 13.8 per block, roughly 45 times the pre-incident rate of 0.3.
The transactions matched the pattern of vulnerable Coldcard addresses, with some funds already swept to second-hop wallets.
“These are LIKELY Coldcard victims — they match the shape of coldcard vulnerable utxos and the elevated transaction pattern gives me high confidence they are another wave of attacks,” Thorn said.
The executive added that similar transactions remain pending in the mempool with replace-by-fee (RBF) enabled. RBF lets the sender replace an unconfirmed Bitcoin transaction with a higher-fee version. In some cases, this allows a victim to outbid an attacker’s competing transaction before either is confirmed.
Per Onchain Lens, confirmed losses stand at $88.6 million. Earlier waves drained individual holders in minutes, including one Canadian victim who lost $1.6 million.
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Coldcard Destroys Remaining Vulnerable Inventory
Meanwhile, Coldcard said Sunday it halted shipments and destroyed all remaining devices carrying the flawed firmware. Satscard, Opendime, and Tapsigner are unaffected.
The patched firmware protects only newly generated seeds. Users must create a fresh seed and migrate funds. The company also told victims to keep affected devices as its legal team coordinates with law enforcement.
“We’ve also been in direct contact with the wider hardware wallet and self-custody community, including other builders, researchers, and people who’ve thought hard about this kind of failure. All have graciously offered whatever resources they could spare. We are still engaged in this outreach and are committing to work with the broader industry going forward,” the team said.
The incident has already drawn warnings from CZ about hardware wallet risk. Whether wave 4 gains confirmation, and whether pending fee races rescue funds, may decide the final toll.
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The post Coldcard Bitcoin Exploit Enters Fourth Wave With 462 New Suspected Victims appeared first on BeInCrypto.
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