Bitcoin Network Split and Bybit's Lawsuit Against North Korea

This week saw a Bitcoin network split due to BIP-110 and Bybit's lawsuit against North Korea over a $1.5 billion theft, alongside significant developments in the crypto space.

The Bitcoin network experienced a split due to the BIP-110 soft fork, while Bybit filed a lawsuit against North Korea over the theft of $1.5 billion. Additionally, the U.S. Senate postponed voting on the CLARITY Act and other significant events unfolded over the past week.

Bitcoin Reaches $65,000 Again

The week began with continued price correction, as on August 4, the leading cryptocurrency dipped below $63,000. Throughout the following days, Bitcoin traded within a narrow range of $62,000 to $63,000.

On-chain data from Glassnode indicated a record-long capitulation phase for Bitcoin. Analysts cautioned that the decrease in volatility does not imply market calmness.

Subsequently, prices began to rise and reached $65,200 at the time of writing, marking the highest level since late July.

Hourly chart of BTC/USDT on Binance. Source: TradingView.

This turnaround was fueled by institutional flows, with spot Bitcoin ETFs attracting $853 million. Analysts from CryptoQuant noted that large holders accumulated Bitcoin, Ethereum, and XRP, with wallets holding between 10 and 10,000 BTC purchasing over 20,000 coins since July 29.

Source: SoSoValue.

Ethereum funds also showed positive momentum, receiving $244 million, the largest weekly inflow since mid-April.

Source: SoSoValue.

Over the week, Bitcoin's price increased by 3.4%, while the leading altcoin rose by 3.7%. The most notable performance came from the Hyperliquid token, which surged by over 6%.

Source: CoinMarketCap.

The cryptocurrency fear and greed index remains in the "fear" zone, sitting at 31 points.

Source: Alternative.me.

The total market capitalization of digital assets rose from $2.16 trillion to $2.22 trillion, with Bitcoin's dominance increasing slightly from 58.5% to 59.3%. Ethereum's share reached 10.5%.

Bitcoin Network Splits Due to BIP-110 Soft Fork

On August 8, the Bitcoin network split at block #961,632, as nodes running the BIP-110 software stopped accepting blocks from miners who did not signal support for the proposal.

The split occurred due to two competing blocks at the same height. AntPool mined block #961,632 without a support signal, which was accepted by the main network, while supporters of the proposal switched to an alternative from the Roughnecks mining pool working through Ocean.

The difficulty of mining hindered the newly split chain from catching up with the main network, as the next difficulty adjustment coincided with the split block. In eight hours, it mined two blocks compared to 48 by the main network.

Source: BIP110 Situation Monitor.

Initially, there was little support for the proposal, with only 2.53% of blocks signaling approval two weeks before the soft fork, far below the required 55%.

Prior to the split, developer Kevin Loak warned of the risk of losing real Bitcoins when selling coins from the new network. Both branches accept the same transactions, meaning a signed transfer could be sent to the main network by a malicious actor.

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Strategy Continues to Sell Bitcoin

From July 27 to August 2, Strategy sold 1,638 BTC worth $104.7 million at an average price of $63,957 per coin. The proceeds were used for dividends on preferred shares and a stock buyback, with the company repurchasing 912,143 shares for $81.2 million.

The company’s Bitcoin reserves have decreased to 842,138 BTC. At current prices, this position is valued at $52.6 billion, while it cost $63.51 billion to acquire, resulting in an unrealized loss of $10.9 billion.

Bitcoin holdings of Strategy. Source: Bitcoin Treasuries.

These sales are no longer a one-time measure; they are part of a capital management framework introduced by the company at the end of June, which sets a Bitcoin sale limit of $5 billion and a stock buyback limit of $1 billion, prioritizing STRC shares.

In the second quarter, Strategy reported a net loss of $8.22 billion, primarily due to revaluation of its cryptocurrency assets, and announced plans to continue selling.

CEO Fong Le stated that capital raised through STRC would no longer automatically go into Bitcoin. The dividend rate on these shares will remain at 12% annually until their prices stabilize near the nominal value of $100.

In contrast, other corporate treasuries are taking different approaches. BitMine Immersion Technologies purchased 10,399 ETH during the same week, increasing its reserves to 5.7 million coins, which is 4.8% of the circulating supply of the second-largest cryptocurrency. The company estimates its total assets at $11.3 billion.

Coldcard Hack Triggers a Wave of Checks and New Attacks

The asset theft from Coldcard hardware wallets that began on July 30 escalated into a review of the entire Bitcoin infrastructure over the past week, resulting in new hacking incidents.

Galaxy Research estimates the losses from three confirmed waves of attacks at $100 million, with the total potentially reaching $130 million when factoring in a suspected fourth wave. Analysts believe at least 15 different attackers exploited the vulnerability.

The incident did not trigger a mass sell-off; instead, holders transferred funds to new addresses rather than exchanges, according to Glassnode. Eight on-chain indicators exceeded their median values over the past two years, with the volume of Bitcoin that had been inactive for over a year increasing nearly tenfold.

In the wake of the hack, phishing incidents surged. On August 4, Trezor and Foundation issued warnings about emails from manufacturers offering to conduct "equipment audits."

Industry criticisms have focused on the quality of audits. Kraken's security director, Nick Percoco, pointed out a gap in testing cold storage: auditors confirm the presence of an approved random source in a device, but not whether the working firmware actually uses it.

Ledger's CTO, Charles Guillemet, added that open source does not equate to verified: a bug had remained in a public repository for over five years.

The discussion quickly shifted to artificial intelligence. Dragonfly managing partner Hasib Qureshi estimated that checking code with a neural network would cost $2 and could identify problems. He noted that cybersecurity has become a cost question, with attackers scanning others' code using AI models, forcing defenses to adapt similarly.

A volunteer group called Bitcoin Red Team initiated checks in this format, deploying language models on codebases of Bitcoin projects. In 27.5 hours, they submitted 4,962 reports on 390 projects, classifying 85 findings as critical risk and 635 as high risk.

By August 8, the scale had nearly doubled, with 7,958 reports on 501 protocols, including 168 critical and 1,120 high-risk issues. Approximately a quarter of the vulnerabilities were reproducible with working attack examples, and results for 174 projects were shared with developers.

🚩 Bitcoin Red Team Update
We're continuing a large-scale security review of the Bitcoin open-source ecosystem.
25 Bitcoin developers around the world have been working on this task non-stop for 108 hours. pic.twitter.com/CwNXHgRmdn
— calle (@callebtc) August 8, 2026

One of the identified issues led to a new incident. On the night of August 8, attackers drained Lightning Network nodes operating through the BTCPay payment server.

The vulnerability allowed remote access to the node's access key. Developers were warned about it by members of the Bitcoin Red Team, but by the time the warning was published, the attack was already in progress. Users were urged to immediately update their LND software to version 2.4.2 or disable their servers.

Bybit Files Lawsuit Against North Korea and Lazarus Group

Cryptocurrency exchange Bybit has announced a civil lawsuit against North Korea, its intelligence agency, and the Lazarus Group for the theft of $1.5 billion that occurred in February 2025.

The documents were filed in the District of Columbia federal court on June 18 under seal, and were only unsealed in early August. Besides the North Korean state, twenty unidentified individuals and entities are listed as defendants.

The exchange is seeking the return of the stolen funds, approximately $1.5 billion in damages, as well as penalties and treble damages under U.S. organized crime laws.

Less than one-tenth of the stolen funds have been traced. By the time the lawsuit was filed, 90.2% of the stolen amount had passed through mixers, cross-chain bridges, and over-the-counter dealers, rendering it untraceable. Approximately $75.5 million, or 5.3% of the total, was able to be frozen or recovered.

The court has allowed the exchange to expedite requests for account holder identities, balances, and transaction histories from trading platforms with infrastructure in the U.S.

Meanwhile, the scale of North Korean operations has proven to be broader than previously known. Greek cybersecurity expert Vangelis Stikas discovered traces of North Korean hackers in the systems of 1,640 organizations across 57 countries, with 700-800 cases involving serious infrastructure compromises.

The researcher gained access to several command-and-control servers used by the attackers and analyzed around 5 TB of data.

Hackers primarily infiltrated systems through fake job interviews, posing as recruiters from cryptocurrency and AI companies and asking candidates to run an NPM package, which would then load a backdoor onto their devices. They were primarily targeting cryptocurrency wallets and their keys.

Most of these incidents have not been independently confirmed. Some of the organizations mentioned reported incidents, but Coinbase and Boston Children's Hospital found no breaches within their internal systems.

Stolen cryptocurrencies have become a significant revenue source for Pyongyang. North Korean groups are responsible for over 70% of the global volume of digital asset thefts, compared to about 30% in 2017, according to data from TRM Labs.

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U.S. Senate Postpones CLARITY Act Vote Until September

On August 6, the U.S. Senate delayed a procedural vote on the cryptocurrency market structure bill until after the August recess. This decision was confirmed by Senate Majority Leader John Thune.

Two days earlier, the upper chamber reached an impasse regarding the bill's passage. To overcome the 60-vote threshold, Republicans, who control 53 seats, need support from at least seven Democrats. There is also a lack of unity within their own faction, as some senators oppose yield on stablecoins.

A key unresolved issue remains the ethical standards block, which would require the president to divest from cryptocurrency businesses. According to Bloomberg, forced asset sales would allow Donald Trump to defer paying federal capital gains taxes for years.

However, it is still too early to write off the bill entirely this year. Following the night session, Thune filed a motion to end the debates on the document. The first procedural vote is scheduled for September 15, the day after the Senate returns to Washington.

This step does not guarantee the bill's passage; it merely limits debates on moving to consideration. However, without it, the CLARITY Act would likely be excluded from the 2026 agenda.

Positive sentiment also spread to traders on Polymarket, who assessed the chances of the bill passing by the end of December at 14% on August 5; this figure has now risen to 21%.

Source: Polymarket.

Miners Face Losses and Compete for Electricity

The largest U.S. mining company, MARA Holdings, reported a net loss of $611.3 million for the second quarter, compared to a profit of $808.2 million a year earlier. Revenue fell by 27% to $174.9 million.

This downturn was attributed to the drop in Bitcoin prices. The average Bitcoin price for the quarter was 28% lower than the previous year, negatively impacting mining revenues and the value of coins held on the balance sheet.

Production metrics improved, however, with output increasing by 3%, computing power rising by 22%, and costs decreasing.

Similar results were seen at CleanSpark, which reported a 30.5% decline in quarterly revenue to $138 million, and instead of a profit of $257.4 million, posted a loss of $239.8 million.

The industry is quickly responding to the issue. Companies are intensifying their competition for energy resources; Zcash-focused Fortitude Mining acquired a 12.5 MW facility in Nebraska, expanding its portfolio to 60 MW across seven locations. Previously, MARA invested up to $600 million in a site in Matagorda County, Texas, while Hut 8 rented the second phase of the Beacon Point AI campus for $9.8 billion.

AI developers are competing with miners for energy in the same areas. SpaceX and Tesla announced plans to build a Terafab chip factory in Texas with initial investments of $16.8 billion. Amazon confirmed its participation in a gas station project with a capacity of 7.65 GW in the same state, which would be the largest in the U.S. by permitted emissions.

The energy crisis in the state has drawn attention from authorities. Governor Greg Abbott ordered an audit of data centers and paused their connection to the grid until the review is complete. There are over 1,800 applications pending for 474 GW, nearly 90% of which are from data centers.

For miners with already approved capacities, this could be a boon. Bernstein estimates that the moratorium will hurt speculative projects, while the value of sites with approved energy contracts will increase, with analysts identifying IREN and Riot Platform as potential winners.

Weekly Summary: Bitcoin Network Split and Bybit's Lawsuit Against North Korea