Hackers are funneling millions in stolen crypto into Zcash’s shielded pools, and with a major network upgrade vote days away, the question is whether the laundering activity reaches exchanges before developers can flip the switch.This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
Hackers are shifting stolen crypto into Zcash (CRYPTO:ZEC), and the ZEC price has declined as these transactions increase. On-chain analyst Specter noted that several hackers have followed the Bitget exploiter into Zcash after blockchain investigator ZachXBT disclosed the movement. Among them are the individuals involved in the CryptoBilis Ledger breach and the $12 million Triple-A exploit.
ZEC is trading at about $1,166, down 10.8% over the past week. On October 17, it closed at $1,126, below every daily close from the previous month, down 23.1% over the last 30 days.
Zcash developers meet on October 20 to determine when the NU7 upgrade will be implemented on the main network. So could the influx of hacked funds negatively impact ZEC before the upgrade is confirmed?
Hackers Are Hiding Stolen Funds in Zcash’s Shielded Pools
spyarm / iStock via Getty Images
Zcash offers users a choice between public addresses, similar to Bitcoin’s open ledger, and shielded pools. When users shield their coins, they deposit them into these pools, where the network conceals the sender’s and recipient’s identities and the transaction amounts. Investigators can still see coins entering these pools, and they can sometimes track funds returning to public addresses by analyzing timing and amounts.
The first notable case involved a Bitget breach on September 24, which resulted in a $387.5 million loss. The attacker then moved 2,746 ZEC, worth about $3.9 million, into Zcash’s Ironwood shielded pool, according to records identified by ZachXBT. This attacker turned to Zcash after a cross-chain swap service declined most of a $50 million laundering attempt.
The CryptoBilis Ledger attacker followed a similar strategy. According to Specter, this individual had already converted funds into ZEC across different chains before depositing 2,990.3 ETH, valued at around $7.5 million, into the Tornado Cash mixer on October 9 and 10. Mixers pool coins from various users, making it harder to trace each individual transfer.
Exchanges Might Pose a Greater Risk to ZEC Than Hackers
Who is Danny / Shutterstock.com
Anti-money-laundering regulations require exchanges to know the source of customer funds. Regulators view coins designed to obscure this trail as a compliance risk, which has led some exchanges to delist privacy coins in the past to avoid regulatory scrutiny. A delisting removes a coin from trading on that platform and can drastically reduce its buyer base.
So far, exchanges have not restricted, frozen, or delisted ZEC in light of the laundering reports, and investigators have not linked ZEC’s decline to hacker activity. On October 17, ZEC dropped sharply from $1,159 to $1,096 within a single hour.
Much of the decline can be attributed to leverage. Investment platform Pluang indicated that ZEC’s 10.7% drop on October 15 was due to forced liquidations. This occurs when an exchange closes a trader’s position because the collateral provided has fallen too low. Such forced sales drive the price lower, triggering further liquidations. However, this selling pressure typically stops once overleveraged traders are eliminated, meaning it doesn’t explain the ongoing decline over the past month.
While the laundering activity may not affect ZEC immediately, it could pressure the price more gradually. Hackers who convert stolen funds into ZEC will eventually need to exchange them back to spend, resulting in additional sell orders over time. Each negative report increases the likelihood that an exchange may decide ZEC is not worth the compliance risk.
ZEC Swings Harder Than Bitcoin and Ethereum Ahead of NU7
Saulich Elena / Shutterstock.com
Over the past week, ZEC has fallen 10.8%, while Bitcoin (CRYPTO:BTC) has dropped only 0.8% and Ethereum (CRYPTO:ETH) 4.6%. ZEC has also bounced back harder, rising by 3.8% in 24 hours compared to Bitcoin’s 1.5% and Ethereum’s 1.1%.
ZEC’s volatility can be attributed to its prior growth. Over the past year, ZEC surged by 427.8%; in contrast, Bitcoin fell by 23.4% and Ethereum by 36.9%. Holders with such large gains tend to sell quickly in response to bad news. Additionally, ZEC has thinner order books, meaning fewer buyers are available at any given price point, so each sell order pushes the price down more significantly.
ZEC also faces a unique risk compared to major cryptocurrencies. Although stolen funds also circulate through Bitcoin and Ethereum, these transactions are traceable on their public ledgers. As a result, regulators view a privacy-focused coin as presenting a different set of challenges.
The NU7 upgrade went live on Zcash’s public test network on October 4. This upgrade shortens the time between blocks from 75 seconds to 25, reallocates 60% of transaction fees into a reserve for future mining rewards, and discontinues the old Sprout privacy pool. Developers plan to review test results on October 20, with November 5 as the target mainnet launch date.
Will Hacker Transactions Affect the ZEC Price Before NU7?
We predict ZEC could hold the $1,100 mark highlighted by 24/7 Wall St. leading up to the NU7 launch, mainly because exchanges have yet to respond to the laundering reports. While NU7 aims to speed up Zcash transactions, it does little to address core compliance concerns about the origins of shielded coins. A delay announced on October 20 could diminish the only positive catalyst ZEC has left before November.
An exchange notice poses the bigger near-term threat, and the upgrade can’t offset it. If a major exchange announces a ZEC delisting or deposit restriction before November 5, ZEC could break below its October 15 low of $1,072, whatever developers decide. If developers set the activation height and ZEC closes above $1,100 through November 5, the market is likely treating the hacker flows as noise.
Contact [email protected] for any questions or corrections.
Click Here For The Original Source.
——————————————————–
