Bitcoin surged to $85,000 as a massive short squeeze and nearly $1 billion in spot ETF inflows drove market gains. However, severe operational and legal headwinds emerged as exchange Bitget suffered a $351.6 million hack, New York sued Polymarket, and regulators opened investigations into Kalshi. Additionally, the Federal Reserve proposed strict reserve rules for stablecoins, while Tether clarified its minimal exposure to a seized bank.
exchange Bitget suffered a $351.6 million security breach on Thursday, prompting the platform to temporarily suspend withdrawals while it completes a security review. CEO Gracy Chen announced that unauthorized transfers affected a portion of the exchange's hot and warm wallet layers, though cold wallets and user funds remain secure. The compromised were consolidated into a single address across multiple blockchains, including ETH, BNB, AVAX, and USDT0. Bitget maintains a user protection fund holding over $464 million to cover the affected amount. and trading continue to operate normally during the investigation. Arkham Intelligence analyst Emmett Gallic initially flagged unusual wallet movements involving three hot wallets and one cold wallet. The company promised to publish a full incident report within 24 hours. Bitget's native token, BGB, fell 2.9% following the news, while and ether dropped 0.29% and 0.2% respectively over a 24-hour period. The incident follows a $320 million hack of the Liquid Network earlier in the month.
Token Price Changes (%)
BGB fell 2.9% following the hack, while bitcoin and ether dropped slightly.
Bitcoin Reaches $85,000 as Short Squeeze Triggers $648 Million Liquidations
reached $85,000 as a triggered $648 million in liquidations. U.S.-listed spot Bitcoin exchange-traded funds recorded a net inflow of $998.95 million on Monday, marking their largest daily intake since October 6, 2025. BlackRock's IBIT led the inflows with a significant amount, followed by Ark's ARKB and Fidelity's FBTC. Total net across U.S. spot Bitcoin reached roughly $111 billion on Tuesday, up 56% from their 2026 low of $71 billion on June 30. The intake lifted the month-to-date tally to a strong figure following August's inflows, though spot Bitcoin ETFs remained down $450 million on a year-to-date basis. Total volume and open interest shifted over the period.
Bitcoin ETF Inflows ($M)
Monday inflows reached a 2026 high of nearly $1 billion.
Tether Addresses Minimal EQIBank Exposure After $89M US Asset Seizure
Tether holds less than 0.034 percent of its total group at EQIBank, a Dominica-licensed lender facing potential liquidation after U.S. prosecutors seized roughly $89 million in assets from its payment processor. U.S. authorities froze the funds as part of a civil forfeiture complaint alleging that Montana-based payment processor Capstone illegally transferred hundreds of millions of dollars at the direction of EQIBank. Tether denied any knowledge of the conduct cited by the Department of Justice. Based on Tether's June report of $187.75 billion in group assets, the stated percentage points to an exposure of roughly $64 million. The seizure affected about 80 percent of EQIBank's monetary holdings, though the disclosure presents no immediate threat to the USDT peg or reserves.
New York State Sues Prediction Market Platform Polymarket Over Gambling Laws
New York State sued prediction market provider Polymarket on Thursday, alleging the platform is operating an unlicensed gambling business. Attorney General Letitia James and Governor Kathy Hochul filed the lawsuit against QCX LLC, doing business as Polymarket US, asking a court to halt operations and seek restitution, forfeiture of illegal gains, and penalties equal to three times those gains alongside $100,000 for each attempt or offer of sports wagering. Polymarket launched its U.S. platform in December 2025, offering contracts on sporting events to users between the ages of 18 and 20, while New York law requires users to be at least 21 for mobile sports betting. The state argues the event contracts constitute illegal gambling that bypasses taxes funding public schools and problem gambling programs. The lawsuit follows similar state actions against rival prediction platforms including Kalshi, which New York sued in July while seeking up to $36 billion in penalties. Prediction markets argue their products are financial under the exclusive jurisdiction of the Trading Commission, setting up an ongoing conflict between state gambling regulators and federal oversight. Polymarket chief legal officer Neal Kumar said the company intends to fight the lawsuit.
Federal Regulators Scrutinize $5 Billion in Unusual Kalshi Trades
Federal regulators are examining unusual trading patterns across Kalshi following a working paper that flagged roughly $5.87 billion in concentrated perpetual- transactions. The Futures Trading Commission is reviewing the activity before deciding whether to open a formal enforcement investigation. The paper, posted online on Sept. 21 by an author using the name OctopusTakopi, analyzed 4.1 million Kalshi trades worth about $11.5 billion between Sept. 5 and Sept. 18. Three trade-size clusters represented roughly $5.87 billion, or 51%, of the total volume evaluated in the study. In , trades of about $5,000 and $2,500 made up 57% of volume, while more than $5 billion in ether trades clustered around $5,500 over the past month. Similar fixed-dollar patterns appeared in 17 of the 20 perpetual contracts reviewed. The research also highlighted a near-simultaneous change in dominant trade sizes on Aug. 24, where bitcoin and ether parameters shifted within about 10 seconds. Former quantitative trader Benoit Dubosson raised wash-trading concerns regarding the activity, while Kalshi denied finding any evidence of wash trading. Kalshi spokesperson Elisabeth Diana attributed the patterns to incentives designed to bring to new markets and stated the company has not been contacted by the CFTC.
Kalshi Volume Distribution ($B)
Fixed-dollar clusters accounted for over half of Kalshi perpetual volume.
Fed requests public comment on payment stablecoin regulatory proposals under GENIUS Act
The Board proposed a comprehensive regulatory framework for payment issuers to implement its requirements under the GENIUS Act. The first proposal requires authorized issuers to fully back tokens with permissible reserve like short-term bills while establishing standardized requirements to address credit and operational risks. Issuers face an operational-risk capital charge equal to 2 percent of the first $20 billion in stablecoins outstanding, 1.5 percent of the next $30 billion, and 1 percent of amounts above $50 billion. The rules also bar issuers from paying interest or solely for holding stablecoins. A second proposal establishes a tailored application process for Fed-supervised banks seeking to issue stablecoins through subsidiaries, requiring business plans and financial information. Both proposals are open for a 60-day public comment period following publication in the Federal Register.
Blockchain Association Leadership Shift Follows Failed CLARITY Vote
Summer Mersinger will step down as CEO of the Association on October 16, and former chief executive Kristin Smith will return to lead the advocacy group as interim CEO. The leadership change follows a significant legislative setback for the industry, after the U.S. Senate failed to advance the Digital Market Clarity Act in a cloture motion earlier this month. Mersinger joined the organization in June 2025 after leaving her post as a commissioner with the Trading Commission. During her tenure, the group advanced the Guiding and Establishing National Innovation for U.S. Act and pushed for regulatory clarity at the Securities and Exchange Commission and the CFTC. The failed Clarity Act vote leaves the legislation in limbo until 2027. Smith, who previously ran the association from its launch in 2018 until 15 months ago, will step into the interim role while retaining her position as president of the Solana Policy Institute.
Surging Bitcoin demand clashes with intensifying state and federal regulatory scrutiny over derivative platforms and stablecoins. Whether institutional inflows can sustain momentum despite mounting legal enforcement and security breaches across crypto infrastructure remains the key question.
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