Crypto Chaos: CLARITY Act, DeFi Hacks, ETFs Boom, and Bhutan’s BTC Sell-Off

Weekly Wrap: CLARITY Act Enters “Red Zone,” DeFi Hacks Stack Up, ETFs Explode With $1.9B

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The CLARITY Act’s sudden momentum may lead to a Senate vote in May, potentially shaping the future of cryptocurrency regulation.

A surge in DeFi exploits, including the $333K GatewayEVM hack, may prompt increased security measures across blockchain platforms.

The deepening institutional commitment to Bitcoin and Ethereum treasuries is likely to influence the market’s trajectory in the coming weeks and months.

Here’s your cryptocurrency market update for this week. While last week focused on the fallout from KelpDAO and RaveDAO, this week the main topics were the quick progress of the CLARITY Act, new security breaches affecting ZetaChain and Syndicate Commons, and increased investment in Bitcoin and Ethereum by larger institutions.

Bhutan continued to sell Bitcoin, Western Union launched a new stablecoin, and Polymarket experienced a very eventful week. Here’s a closer look.

Top headlines for this week

Below are the major headlines, giving an overview of what happened in the crypto market this week.

CLARITY Act breaks deadlock, Senate signals vote is near

The most important regulatory news this week concerned the CLARITY Act. After a long period of being stuck on issues like how stablecoins earn returns and strong opposition from banking groups, the bill now seems to be moving forward.

At a Bitcoin conference, Senator Lummis suggested the bill might pass in May. Senator Tim Scott then indicated lawmakers are close to voting on it, describing the situation as being in the “red zone.” Following these comments, predictions on Polymarket for the bill’s passage jumped to 61%, suggesting a deal had been reached to overcome previous obstacles that had halted progress since April.

Time is short for Congress. The Senate only has about nine to ten weeks before its summer break, and several important issues – including renewing the FISA law, passing a budget, and funding the Department of Homeland Security – are all vying for attention. However, this is the strongest progress this particular bill has made in months, and the cryptocurrency industry is carefully monitoring the situation.

ZetaChain pauses after $333K GatewayEVM exploit

ZetaChain, a blockchain designed to connect different networks like Ethereum, Bitcoin, and Solana, temporarily stopped all transfers between chains after a hacker stole $333,868 worth of stablecoins from one of its key contracts, called GatewayEVM.

After investigating the security incident, it was discovered that three separate software flaws combined to allow an attacker to access internal wallets. The attacker moved funds across four different blockchains using nine transactions, exchanged stablecoins for ETH on decentralized exchanges, and then used Tornado Cash to hide the transactions. Fortunately, no user funds were affected. However, the incident highlighted serious concerns about how access is managed and approved within the project, which is a leading innovator in cross-chain technology.

ZetaChain announced the security issue publicly one day after it happened and temporarily stopped cross-chain transactions on its main network while they fixed the problem.

Syndicate Commons Bridge drained for ~$400K

ZetaChain wasn’t the only project targeted this week. The Syndicate Commons Bridge also suffered a security breach, losing around $400,000. This attack is part of a concerning trend in 2026, highlighting that bridges – which connect different blockchains – are consistently the weakest link in the world of decentralized finance (DeFi).

Arbitrum DAO votes on releasing $71M in frozen Kelp hacker ETH

The situation following the KelpDAO incident continued to unfold. Aave Labs and Kelp DAO urged Arbitrum to unlock the funds that had been frozen due to the exploit. By May 1st, the Arbitrum DAO officially began a vote to decide whether to release the $71 million in frozen ETH to DeFi United, the group working to recover the lost funds.

TRON and HTX, led by Justin Sun, are contributing $20 million to Aave’s DeFi United program, helping to stabilize the platform. This adds to a growing effort within the decentralized finance (DeFi) community to provide support.

Bitcoin and Ethereum treasury buying accelerates

Bitcoin purchases by major companies continued this week. Strategy added over 3,200 Bitcoin, continuing its regular buying. Strive increased its Bitcoin holdings to a value of $1.3 billion with a purchase of 789 BTC. Meanwhile, Tether, a stablecoin issuer, revealed it now holds 140,000 Bitcoin and plans to merge with Twenty One Capital, signaling its goal to become a key part of the Bitcoin network.

Bitmine significantly increased its Ethereum holdings, adding over 100,000 ETH to bring its total past 5 million. They then reinforced this position with a $366 million stake in the Ethereum network. It’s clear that Bitmine’s Ethereum investments are now a major focus.

U.S. Bitcoin ETFs saw a record $1.9 billion in investments during April, making it their best month since they became available. This surge nearly doubled the amount of money coming in compared to previous months, turning the year’s overall investment numbers positive. Since launching in 2024, these ETFs have now attracted around $58 billion in total.

Bhutan quietly sells off 9,579 BTC

Unlike many institutions that were purchasing Bitcoin, Bhutan has been selling off its holdings since October 2024. The country has reduced its Bitcoin reserves by over 70%, transferring nearly 9,579 BTC to various exchanges, over-the-counter trading platforms, and unidentified digital wallets.

Although the selling has happened slowly and hasn’t attracted much attention, it’s one of the biggest instances of a government selling off its Bitcoin holdings ever recorded.

Bitcoin ‘eCash’ hard fork divides the community

Paul Sztorc, a veteran Bitcoin developer, has revealed plans for a new version of Bitcoin called eCash, expected in August 2026. The most debated part of this plan involves potentially redistributing up to half of the 1.1 million Bitcoins linked to wallets believed to be controlled by Bitcoin’s creator, Satoshi Nakamoto. eCash will largely mirror Bitcoin’s original code but include improvements designed to make it faster and more versatile.

The proposal has sparked disagreement among Bitcoin enthusiasts. Some believe it’s a helpful update, while others view it as a threat to Bitcoin’s core idea that no single group should control or move coins around.

Litecoin hit by 13-block MWEB exploit and reorg

A flaw in Litecoin’s MWEB privacy feature allowed someone to manipulate the blockchain, causing a rollback of about 32 minutes of transaction history. This event, known as a chain reorganization, potentially put around $600,000 worth of funds at risk.

Litecoin developer Loshan is urging users to update their nodes right away. He explained that a recently discovered flaw could be exploited through a combination of a software bug and a network attack that disrupts service.

Polymarket launches CLOB v2, then faces breach allegations

Polymarket experienced a turbulent week. They launched their highly anticipated CLOB v2 upgrade, offering $1 million in rewards and introducing a new pUSD token. However, the positive news was quickly overshadowed by reports of a potential security breach, where data from over 300,000 accounts and hacking tools were allegedly leaked online.

The company claimed there was no security breach, but researchers discovered weaknesses in its programming, hidden access points, and publicly available data. This happened at a particularly bad time, immediately following a significant new product release.

Western Union enters crypto with USDPT stablecoin

Western Union, a long-established money transfer company, entered the stablecoin market in May with the launch of its USDPT. This move comes at a key time, as new legislation called the CLARITY Act could soon change the rules for stablecoins like this one.

News you might have missed

Worldcoin faces fresh scrutiny: Elon Musk jabbed Sam Altman with the “Scam Altman” label, and on-chain investigator ZachXBT piled on with new claims as Worldcoin came under renewed pressure.
Fake Arthur Hayes email scam: A phishing campaign impersonating BitMEX co-founder Arthur Hayes targeted crypto users with a fake trading scheme.
India’s MHA warns on Trust Wallet drainers: India’s Ministry of Home Affairs issued an advisory on Trust Wallet drainer scams, the latest sign that Indian regulators are taking crypto-specific fraud seriously.
Mysterious wallet drains 326 ETH: A mysterious wallet drained 326 ETH from over 570 Ethereum addresses, raising alarms about potential private key compromise or phishing at scale.
Solana bot turns 23 cents into $696K: A Solana arbitrage bot converted 23 cents into $696,000 after the ANB token crashed, a reminder of how fast MEV extraction operates on high-speed chains.
Hyperliquid enters prediction markets: Hyperliquid launched prediction markets in a direct challenge to Polymarket’s dominance.
Solana co-founder warns on quantum risk: Solana co-founder said Ethereum L2s are “not quantum safe”, continuing the quantum security conversation that has been building across the industry.
Brazil bans crypto in eFX settlements: Brazil banned virtual assets in eFX cross-border payment settlements, taking a sharply different path from other major economies.

Buzz of the Week

The CLARITY Act was the big story this week. After a lot of delays and opposition from banking groups, the bill is now gaining momentum. Senator Lummis, Senator Tim Scott, and predictions from Polymarket all suggest a vote could happen soon – potentially within the next few weeks.

This situation feels different from past unsuccessful attempts because of increasing pressure from politicians. The Senate is running out of time before their summer break, and both Democrats and Republicans have members eager to demonstrate they’re getting things done before the election season begins. Plus, the disagreements over interest rates that blocked previous efforts now seem to have a potential solution that could allow progress.

If the CLARITY Act is approved, it would be the most significant law regarding cryptocurrency ever passed in the United States. However, if it fails to pass now, it’s unlikely to be considered again this year.

Exploits in the decentralized finance (DeFi) space are still happening frequently. Just last week, ZetaChain, Syndicate Commons, a bug in Litecoin’s MWEB, and a large-scale theft from over 570 Ethereum accounts all experienced security breaches. The problem isn’t one specific weakness, but a general lack of thorough security testing for new technologies like bridges, cross-chain systems, and privacy features before they’re widely used.

The amount of Bitcoin and Ethereum being bought by institutions is really starting to stand out. Companies like Strategy, Strive, Tether, and Bitmine, plus the $1.9 billion flowing into ETFs, show a growing institutional interest. This is happening at the same time as some countries, like Bhutan, are selling their holdings. This combination – consistent institutional buying and country-level selling for profit – is a key underlying trend that’s often overshadowed by news about hacks and other issues.

What to expect for next week?

Next week will largely depend on three key events: if the CLARITY Act passes through committee and is scheduled for a vote, whether the Arbitrum DAO decides to release the $71 million in cryptocurrency stolen by the Kelp hacker – and what impact that decision might have – and finally, whether the number of security breaches in the decentralized finance (DeFi) space starts to decrease, or if another platform is targeted.

The most important thing to watch is what happens with new regulations. If the CLARITY Act is debated in the Senate in May, it could significantly change the rules for stablecoins, cryptocurrency exchanges, and how the market operates. This would make Western Union’s plans for USDPT look smart, rather than risky. However, if the bill fails to move forward, the industry will likely continue operating without clear rules for the rest of 2026.

Bridge and cross-chain systems urgently need to improve their security. The fact that three separate hacks happened in just one week isn’t random – it shows a clear problem. Any protocol that hasn’t had a thorough security check of who can access what and how approvals are handled should carefully study the details of the recent ZetaChain hack to learn from it.

Keep an eye on activity in the cryptocurrency market. With companies like Tether considering a merger and Bitmine investing heavily in Ethereum, the distinction between crypto firms and traditional finance is becoming increasingly unclear, outpacing the ability of regulators to adapt.

2026-05-03 22:29