Transfer of over 3,500 BTC - worth more than $330 million - to Monero (XMR) earlier this week has stirred fresh speculation in both spot and derivatives markets, raising questions about market manipulation tactics, privacy-driven laundering strategies, and the vulnerabilities of low-liquidity assets.
Blockchain investigator ZachXBT suspects the transaction is linked to stolen funds, though the broader implications suggest a more complex scheme may have been at play.
Following the transfer, Monero's price spiked by 45%, but the real anomaly lay in the derivatives markets. Open interest (OI) in XMR futures more than doubled - rising 107% to $35.1 million, according to Coinalyze.
That figure deviates sharply from what would be expected based on the price movement alone: a 45% price increase should have pushed open interest to around $24.2 million. The remaining $11 million indicates that someone was heavily leveraged long on Monero ahead of the rally.
This suggests that the spot activity may have been designed not simply to obfuscate stolen Bitcoin through a privacy coin but to amplify gains through a parallel play in the derivatives market. While on-chain slippage likely resulted in losses of up to 20% - around $66 million due to Monero’s thin liquidity - the derivatives position may have been used to recoup part of that cost.
Monero is known for its privacy features - offering anonymity for both senders and receivers via ring signatures and stealth addresses. But it's also notoriously illiquid on centralized exchanges. In this instance, the total order book depth stood at around $1 million per 2% price range, making the size of the purchase highly disruptive and costly.
The choice of XMR is particularly notable given alternatives that offer greater liquidity and faster transaction execution, such as USDT or ETH. These assets would have allowed for more discreet and efficient fund movement. However, those more traceable assets are also easier for regulators or exchanges to freeze, which may explain the decision to opt for privacy over efficiency.
That said, privacy-preserving tools like Tornado Cash - designed to mix tokens and obscure transaction trails - might have also been viable. But Tornado Cash is heavily monitored, and its use could invite attention or censorship. The Monero route, despite the losses from slippage, likely offered the best combination of anonymity and partial recovery via pre-positioned market plays.
This wouldn’t be the first time attackers or high-risk traders have used spot purchases on illiquid tokens to influence derivatives pricing. A similar strategy was seen in the manipulation of JELLY tokens on HyperLiquid DEX, where a trader artificially pumped spot prices to exploit decentralized oracles and profit from long positions.
It also mirrors the infamous $114 million exploit on Mango Markets in 2022. In that case, trader Avraham “Avi” Eisenberg manipulated the price of MNGO tokens to inflate the value of his collateral, enabling massive loans he never intended to repay. Eisenberg was later convicted of market manipulation and wire fraud in 2024.
The same patterns now seem to be resurfacing: strategic positioning in derivative contracts, orchestrated spot price spikes in low-liquidity tokens, and a profit extraction method that relies on exploiting the inefficiencies between decentralized and centralized financial systems.
While the suspect in this Monero case may still walk away with a net profit - even accounting for slippage - their actions once again expose gaps in crypto market infrastructure, particularly in low-liquidity environments. It highlights how privacy coins, derivatives markets, and low-regulation zones can form a triad that enables sophisticated financial maneuvers potentially outside the reach of current enforcement mechanisms.
As regulators increase scrutiny on crypto market manipulation, cases like these may prompt a closer look at the intersection between privacy, derivatives, and decentralized finance. With Monero continuing to resist mainstream regulatory oversight and derivative exchanges allowing leveraged positions on illiquid assets, the opportunity for abuse remains substantial.