Hardware Wallet Users Exposed in Major Data Leaks

New security threats are emerging for owners of hardware wallets, as two separate incidents have resulted in the leak of personal information for more than 50,000 users. These breaches put the owners of Trezor and SafePal crypto wallets at a high risk of phishing attempts.

Trezor reported a data breach that affected approximately 14,000 users, which occurred through its third-party shipping provider, ShipMonk. The personal data of users who had products delivered from the US, UK, Sweden, Colombia, Brazil, Italy, and Portugal between May 10 and August 8 is now compromised, exposing them to potential phishing attacks that could leverage their personal information.

Separately, cryptocurrency wallet provider SafePal recently disclosed its own security incident. The breach involved unauthorized access to the order information of nearly 40,000 customers, including their names, addresses, and purchase details. In response, SafePal has identified and removed over 30 fraudulent websites and phishing links connected to the breach.

AI Threats and Developer Access

The danger posed by exploits identified by artificial intelligence has become a major point of focus, particularly after $116 million was stolen from Coldcard hardware wallets. Following that incident, the Bitcoin Red Team utilized open-source Chinese AI models to identify thousands of potential cybersecurity weaknesses.

In light of these challenges, a coalition of cryptocurrency firms has called on leading artificial intelligence labs to grant Bitcoin developers early access to their most advanced models. The group, which includes Anchorage Digital, BitGo, Bitwise, Blockstream, Ledger, and Trezor, published an open letter through the Bitcoin Policy Institute. The letter states that guardrails on publicly accessible frontier AI systems are blocking Bitcoin Core developers and other crypto programmers, forcing them to use less capable open-weight models.

CLARITY Act's Prospects Dim as White House Convenes Meeting

Galaxy Digital has significantly downgraded its forecast for the CLARITY Act's passage in 2026, lowering the probability to just 10%. This is a sharp decline from its May estimate, which placed the odds of passage at 75%.

The bill's path is complicated by numerous unresolved political issues and a tight legislative calendar. After the Senate reconvenes on September 14, it will have only 14 days in session to pass the legislation. Alex Thorn, head of research at Galaxy, wrote that unless an initial motion to proceed vote is held immediately upon the lawmakers' return, the CLARITY Act would only have enough time to pass if it "dominates basically the entire working session."

Should the bill fail, the SEC and CFTC are expected to fill the regulatory void by issuing their own rules for the crypto markets. The SEC had scheduled an open meeting on Friday to introduce its "clear rules of the road," but it was later cancelled due to "an unforeseen scheduling issue." The White House was reportedly displeased with the SEC's independent move on crypto rules, fearing it could alienate Democrats and disrupt the sensitive negotiations surrounding the CLARITY Act.

To address the regulatory impasse, a high-profile meeting is scheduled at the White House on Wednesday. Attendees will include SEC Chair Paul Atkins, President Donald Trump, and top executives from Coinbase, a16z, Ripple, Chainlink, the NYSE, and Nasdaq. They will gather to discuss crypto regulation and find ways to advance the bill. The following day, the US Commodity Futures Trading Commission’s new Innovation Advisory Committee is set to meet and discuss the regulation of crypto, AI, and prediction markets.

Regulatory Clashes Over Prediction Markets

The US Commodity Futures Trading Commission (CFTC) has directed the prediction market Kalshi to disregard a restraining order from New York and maintain normal operations. The CFTC said that New York's enforcement action, which labeled Kalshi an illegal gambling business, created a market emergency because it would prevent Kalshi from running prediction markets across the nation. The commission asserts that the Commodity Exchange Act mandates the CFTC to ensure a uniform national derivatives market. CFTC Chair Michael Selig commented that Congress did not intend for derivatives exchanges to be subject to a "patchwork of state gaming laws."

However, just a few days later, a judge in Washington state ordered Kalshi to cease its operations within the state. The judge dismissed Kalshi's claim that federal commodities law supersedes Washington's gambling statutes. Kalshi has been mandated to enact IP-address and residency-based geofencing by August 19, followed by a GeoComply multi-source geofencing system by September 2.

Adding to the regulatory scrutiny, the New York City Council has initiated an investigation into prediction market companies. The probe aims to determine if these firms are engaging in "false and deceptive marketing" by using influencers to target young adults.

Ethereum's Technical Roadmap and Upgrades

The Ethereum Foundation is shifting its strategy for its planned post-quantum architecture by moving away from the Poseidon hash function, according to researcher Justin Drake. On Thursday, Drake said the foundation will now utilize established and extensively tested alternatives such as SHA or BLAKE.

Poseidon is a newer hash function designed for optimal performance with zero-knowledge proofs, which are useful for compressing the large signature sizes required in a post-quantum environment. However, Drake noted that recent breakthroughs now allow SNARKS to be adapted to work more efficiently with existing hash functions. The development roadmap targets a production-ready leanVM for 2027, with deployments across Ethereum’s consensus, data, and execution layers scheduled for 2028.

In other development news, Ethereum developers are reviewing 66 proposals to narrow down the scope of Hegotá, the next major upgrade planned after Glamsterdam. Currently, the censorship resistance proposal FOCIL is the only Ethereum Improvement Proposal (EIP) slated for inclusion. A variety of other EIPs under consideration are centered on enhancing privacy. Core developers are aiming to ship the Hegotá upgrade next year, while the Glamsterdam upgrade is anticipated in the coming months.

Tether Completes First Full Independent Audit

Tether has successfully completed the first-ever full independent audit of its annual financial statements. The audit was conducted by KPMG US, which issued a clean opinion on the stablecoin issuer’s 2025 accounts.

The examination encompassed Tether’s balance sheet, income statement, and cash flows for the year ending on December 31, 2025. It also included a review of the assets that back its issued tokens and the liabilities they represent. Tether said the audited statements confirmed that its reserves surpassed its liabilities by $6.814 billion. This full audit provides a deeper level of scrutiny than the quarterly reserve attestations that Tether has published for years, as it subjected the company's comprehensive financial statements and supporting evidence to independent verification.

Market Wrap and Price Predictions

At the close of the week, market performance showed a downturn for major cryptocurrencies. Bitcoin (BTC) was trading at $62,842, a decrease of 3.3%. Ethereum (ETH) fell 2.3% to $1,872, and XRP (XRP) dropped 4.2% to 99 cents. According to CoinMarketCap, the total cryptocurrency market capitalization stands at $2.16 trillion.

Among the top 100 cryptocurrencies, the three leading altcoin gainers for the week were Velvet (VELVET) with a 131% increase, Ether.fi (ETHFI) up by 31%, and Chainlink (LINK) gaining 14%. The three biggest losers were Uniswap (UNI), which declined by 18%, Aptos (APT), down 12%, and Pepe (PEPE), which fell by 11%.

Regarding future price movements, Swan Bitcoin CEO Cory Klippsten suggested that Bitcoin could find its bottom in October before staging a recovery to approximately $130,000 in 2028. He based this on the historical pattern of Bitcoin bottoming about 12 months after each bull market peak, with the last peak occurring in October of last year. Klippsten told Cointelegraph that Bitcoin might drop to $57,000, or possibly even $53,000, before experiencing a rapid rebound, potentially reaching around $130,000 before the 2028 halving event.

Conversely, Markus Thielen, head of research at 10x Research, dismissed the popular prediction of Bitcoin hitting $1 million by 2030 as not adding up. "It’s mathematically impossible," Thielen explained to Trade Secrets, contending that for Bitcoin to reach a price of $1 million per coin, it would need to attract an additional $15 trillion in capital. This amount is equivalent to about 25% of the total value of the U.S. stock market flowing into Bitcoin within the next four years.

Bitcoin Enters Longest "Capitulation" Phase Since 2022

On-chain analytics firm Glassnode reported on Monday that Bitcoin is currently experiencing its longest capitulation phase since the end of the 2022 bear market. The company’s Bitcoin Cycle Position Heatmap, which tracks forty-five different price metrics, indicates the most prolonged "capitulation" period since the FTX collapse in late 2022.

However, the creator of the metric, Rafael Schultze-Kraft, warned that aggregate readings must worsen to match the levels that signaled previous bear-market bottoms. "Today it sits in its coldest stretch since FTX: late in the bear, but not yet the unanimous deep blue that previously marked a floor," he commented.

Missouri Men Charged in Bitcoin Kidnapping Plot

Three men from Missouri have been charged in connection with an alleged August 2024 plot to kidnap a Bitcoin holder and steal his assets. According to a Tuesday press release from the U.S. Attorney’s Office, Sedric Louis, John Davis, and Martel Williams were allegedly hired to abduct a Bitcoin holder and coerce him into transferring cryptocurrency to accounts controlled by the plot's organizers.

The men traveled from St. Louis to Connecticut, where they rented vehicles and acquired air rifles to conduct surveillance on the victim. After staking out the target's home for two days, they called off their plan due to concerns about being recorded by home security cameras. Shortly after their departure, another crew from Florida reportedly arrived to execute the plan.