You want to read raw lines to avoid problems with backslashes in the input (use -r):
while read -r line; do
printf "<%s>\n" "$line"
done < file.txt
This will keep whitespace within the line, but removes leading and trailing whitespace. To keep those as well, set the IFS empty, as in
while IFS= read -r line; do
printf "%s\n" "$line"
done < file.txt
This now is an equivalent of cat < file.txt as long as file.txt ends with a newline.
Note that you must double quote "$line" in order to keep word splitting from splitting the line into separate words--thus losing multiple whitespace sequences.