Developers recently revealed that a four-year-old vulnerability in Orchard may have allowed unlimited fake Zcash (ZEC) until an emergency patch is released. But new market data has raised further questions about events that preceded the discovery.
After reviewing trading history, Allium Labs detected unusual trading activity. On May 26, ZEC’s trading volume increased 12-13 times the average. Researchers privately revealed the flaw three days later, on May 29.
While researchers detected the flaw, ZEC fell from approximately $660 to $530, indicating increased selling pressure. Developers are disabled orchard It released a patch on June 2 and another on June 3, but trust continued to decline.
As of June 5, ZEC fell 64 percent from $685 to $247, with hourly trading at $560 million.
Early positioning raises doubts in the market
The uncertainty that followed this issue also led to increased scrutiny of which parties were actively trading in the market before the issue became apparent. Allium found that investors opened the most profitable positions on May 25 and 26.
This occurred days before the Orchard flaw was specifically discovered. More importantly, investors opened these large positions before researchers privately disclosed the flaw on May 29. The largest wallet had a short position worth $34.5 million, resulting in a profit of approximately $998,000.
The second short position, valued at $17.7 million, accrued a profit of approximately $724,000. These high profits raised questions about whether traders were expecting sales.
However, the data do not provide sufficient evidence to prove such claims. In futures markets, all short positions are balanced by an equal number of long positions. Therefore, simply showing profitable positions is not sufficient to prove that these positions exist due to prior knowledge.
This trade-off occurred when the largest $91.5 million long position ultimately lost $6.97 million. Meanwhile, Zcash’s privacy model prevents anyone from verifying whether this flaw has been exploited. This left markets pricing in probabilities rather than certainty, leaving confidence fragile despite the completed patch.
Final Summary
- Allium Laboratories flagged unusual ZEC trading prior to the flaw discovery in Orchard, raising suspicion of deliberate positioning.
- Profitable short positions raised questions, but the lack of evidence and Zcash secrecy left trust fragile.
