Crypto
Zcash's Future Looking Bleak After Arthur Hayes’s Recent Dump
5d ago 4,280
BLOCKINSIDERLoading
Key Insights:
Arthur Hayes, co-founder of BitMEX and chief investment officer of family office Maelstrom, did something crazy lately, exiting his position in top cryptos like Zcash, HYPE, etc. The trigger for the exit was a public disclosure of a critical vulnerability in Zcash's Orchard shielded pool, a flaw that went undetected in live code for nearly four years.
Hayes confirmed the ZEC sale in a post on X,
"The Holy Trinity is dead. Sadly, due to the Orchard Pool exploit, I had to dump our entire $ZEC bag. While I think it's extremely unlikely of any minting, it cannot be formally cryptographically proved impossible. The privacy from AI, govt, big tech narrative demands perfection."
The ZEC sale came one day after Hayes had already exited his entire HYPE and NEAR Protocol (NEAR) positions. All three tokens had formed what Hayes publicly called his "Holy Trinity" in a 22 May post on X: "When you are in position, trading is easy, sit back and watch the number go up. $HYPE, $ZEC, $NEAR the holy trinity!"
The Orchard pool is Zcash's most advanced privacy layer, introduced in May 2022 with the NU5 network upgrade. It uses zero-knowledge proof (ZKP) circuits to validate shielded transactions without revealing sender, receiver, or amount to any outside observer.
On 29 May 2026, security researcher Taylor Hornby, hired by Shielded Labs to audit the protocol, identified a critical flaw in the Orchard circuit while using Anthropic's Claude Opus 4.8 AI model. According to Zcash co-founder Zooko Wilcox's disclosure on X, the bug resided in an under-constrained element of the circuit's elliptic-curve multiplication logic.
The practical consequence was severe: the flaw would have allowed a malicious actor to generate unlimited counterfeit ZEC inside the Orchard pool, and those forged coins would have cleared the network's own verification checks without triggering any alerts.
Hornby disclosed the issue to the Zcash Open Development Lab (ZODL), which coordinated an emergency response across the ecosystem. A patch was deployed on 1 June, and an emergency hard fork was activated on 3 June. The vulnerability had been present for just under four years, surviving multiple expert audits without detection.
The most consequential aspect of the disclosure, however, is structural rather than technical. Orchard's privacy architecture, the very property that underpins ZEC's value proposition, makes it cryptographically impossible to determine whether the bug was exploited before the patch was applied.
Wilcox acknowledged this directly. No evidence of exploitation exists, but the absence of evidence is not evidence of absence. That unresolvable ambiguity, Hayes said, was what broke his thesis.
The ZEC exit did not arrive without context. On 4 June, Hayes had already liquidated his entire positions in HYPE and NEAR Protocol, citing a distinct but related set of macro concerns.
On-chain data from Onchain Lens confirmed Hayes sold 247,334 HYPE tokens worth approximately $18 million. HYPE fell 8.3% to $66.44 in the hours after the announcement. NEAR dropped 17.8% to $2.34.
The timing was difficult to ignore. On 1 June, three days before selling, Hayes had publicly challenged Kyle Samani, managing partner at Multicoin Capital, to a $100,000 charity bet on X that HYPE would outperform every other top-ten cryptocurrency by year-end. Samani accepted, nominating Solana (SOL) as his pick.
In the 4 June sell post on X, Hayes set out his reasoning: higher energy prices tied to the Iran war, three large AI initial public offerings (IPOs) anticipated before early Q3, and a prediction that President Donald Trump would pivot against AI ahead of the midterm elections. A fuller account was promised in an essay titled "Reality Test," scheduled for 9 June.
Hyperliquid fundamentals had not deteriorated. The protocol was recording approximately $70 billion in weekly perpetual futures volume, according to DefiLlama. HYPE remained up roughly 134% year-to-date.
Following the ZEC exit, Hayes announced he was retaining one position: Worldcoin (WLD), framed as a high-beta proxy for the AI IPO wave via the SpaceX listing. By 6 June, that holding was gone as well.
The compression is where scrutiny concentrates. The sequence runs from a confident public endorsement on 22 May to the complete liquidation of all four tokens by 6 June, each exit accompanied by its own internally coherent rationale, each announced after the position had already been constructed.
Hayes is under no obligation to hold a position indefinitely, and his stated reasoning for liquidation is justified. But the pattern in liquidation, first giving out a public conviction call, then setting a public price target, and then a rapid exit, has now repeated across enough tokens that it is no longer read by those following his on-chain activity as a mere coincidence.
The Zcash bug disclosure is a serious technical event that merits evasive action. But the broader question it surfaces is also pertinent: how much evidential weight should a retail participant assign to a fund manager's public calls, when that fund manager's exit timeline has, on multiple occasions, been measured in days.
No comments yet
Be the first to share your take when accounts launch.
