Did the $330M BTC Hacker Deliberately Double Down on Monero (XMR) Derivatives?

A recent flurry of spot buys has sent Monero's price soaring by 45% in a matter of days, but open interest in XMR derivatives has increased by an astonishing 107%. The suspicious transfer of over 3,520 BTC ($330.7 million) to the privacy coin Monero (XMR) on Monday has raised eyebrows among blockchain enthusiasts and experts alike. ZachXBT, a prominent cryptocurrency sleuth, believes that this unusual transaction may be linked to a hack - a coordinated effort in the derivatives market.

Monero's unique feature of obscuring sender and recipient addresses makes it an attractive choice for those looking to remain anonymous. However, its limited liquidity on exchanges can also make transactions riskier. The decision to use Monero instead of more liquid cryptocurrencies like Tether (USDT) or Ether (ETH) is unusual, as stablecoins would have provided a smoother and less-slippage-prone way to move funds around.

Furthermore, mixers like Tornado Cash could have been used to obscure the transaction path. However, trading data suggests that there was more going on than a simple case of someone trying to launder stolen funds. The possible hacker likely encountered slippage during the transaction. Combined market depth, which measures order book liquidity over a given price range, was relatively low at around $1 million per 2% on both sides of the book.

This limited liquidity led to XRM surging by 45%, but the high open interest in XMR derivatives suggests that there were already significant long positions in place. According to Coinalyze, open interest in XMR more than doubled to $35.1 million, far exceeding the expected figure of $24.2 million. Taking into account the $1 million in liquidations, it's estimated that someone was already long on XMR worth around $11 million.

This raises an interesting question - why would someone take such a high-risk strategy when they could have easily avoided slippage by using more liquid cryptocurrencies? The answer may lie in the manipulation of derivative markets. Last month, a trader manipulated JELLY prices on decentralized exchange HyperLiquid by buying JELLY on illiquid exchanges and tricking the pricing oracle. This exploit generated significant profits for holders of long positions.

Another example of this type of manipulation is the $114 million Mango Markets exploit in 2022, where a trader named Avi Eisenberg manipulated MNGO prices by borrowing assets using ill-gotten gains as collateral. Eisenberg was found guilty by a jury and faces 20 years in prison. The similarities between these cases and the recent Monero transfer suggest that coordinated activity in derivatives markets may be involved.

In conclusion, while the $330M BTC hacker's decision to use Monero is unusual, the suspicious nature of the transaction and the high open interest in XMR derivatives suggest that something more complex may be at play. Further investigation is needed to determine whether this was a deliberate attempt to double down on Monero derivatives or simply a case of someone trying to launder stolen funds.