Bearish bets on privacy-focused zcash (ZEC) hit a record high as the token fell as much as 50% in 24 hours after a now-plugged vulnerability was revealed in its Orchard pool.
ZEC recorded approximately $118 million in forced liquidations during the period, CoinGlass data shows.
This is remarkably small for a token whose price halved, suggesting that the sale came primarily from tokens held in spot rather than a futures-driven move. Only about 14% of zcash leveraged positions were eliminated; the number would have been much higher if a cascade of leverage had driven the decline.
In comparison, around $335 million worth of bitcoins Tracked futures settled in the same window, even though the largest cryptocurrency fell only a few percent. Ether lost a similar amount and liquidated $278 million.
Open interest (the total value of unsettled futures bets) rose to a record level in ZEC terms, suggesting that traders opened new positions rather than closing them.
The long/short ratio, the number of traders betting on an increase versus a decrease, shows that those positions have a bearish bias. On Binance, the ratio was below 1 among retail investors at 0.77, whale accounts at 0.80, and whale positions at 0.85. OKX traders were more bearish, with retail trading at 0.67 and whale accounts at 0.72. Only Bybit retail traders were long, at 1.49.
Short investors sell securities that they do not actually own, betting that the price will fall before they need to close their positions and they will profit from the difference. Long-term investors hold the securities to benefit from any rise.
The ratio indicates that zcash is heavily shorted after a spot-induced drop. If sales slow and the price stabilizes, short sellers could be forced to buy to cover their positions, leading to a sharp rebound.
It is worth remembering that ZEC, even after losing more than half its value in two weeks, is still up approximately 490% over the past year.
There is no way to know
The catalyst for the price drop was the disclosure by nonprofit Zcash developer Shielded Labs of a vulnerability in Zcash’s Orchard privacy pool that, if exploited, could have allowed an attacker to create counterfeit ZEC that no one could detect.
The Orchard glitch had been active since the pool debuted in May 2022 and went undetected for four years. It was found last week by security engineer Taylor Hornby using Anthropic’s Opus 4.8 model and patched into an emergency fix on June 1.
The damage is due less to the bug itself, which is now closed, than to what Shielded Labs admitted along with it. Because of the way Orchard privacy works, there is no cryptographic way to prove if someone exploited the flaw before it was fixed.
The company said it probably wasn’t, but it can’t be sure and that uncertainty hangs over the entire supply of the token.
Arthur Hayes, chief investment officer at Maelstrom, said he sold his entire position in zcash as a result.
