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Blockchain & Cryptocurrencies Daily Brief · June 5, 2026 · preview

AI-Found Zcash 'Infinite Mint' Bug Rattles Privacy Coins as Bitcoin Slides Toward $60K on Record ETF Outflows

3 min read 10 sources Every claim cited

An AI-assisted security audit exposed a four-year-old counterfeiting flaw in Zcash's largest shielded pool, crashing ZEC roughly 30% and forcing developers to propose a supply-proving upgrade. The shock landed amid a broader risk-off unwind, with Bitcoin sliding toward $60,000 as spot ETF outflows hit a record 13-day, $4.4 billion streak and Strategy's leveraged model showed its first real stress. Washington, meanwhile, raced to advance the Clarity Act and rework bank capital rules for digital assets.

Security & Hacks

  • Shielded Labs disclosed a critical 'soundness' bug in Zcash's Orchard privacy pool that could have let an attacker mint unlimited, undetectable counterfeit ZEC, sending the token down roughly 30%-37% in 24 hours to about $400-$410 and erasing more than $3 billion in market cap. Security engineer Taylor Hornby, engaged by Shielded Labs in April 2026, found the flaw on May 29 using Anthropic's Opus 4.8 model (released May 28) in a targeted review of the Orchard circuit, where an under-constrained elliptic-curve check could be fed false inputs and still pass; he wrote a working exploit that generated unlimited counterfeit ZEC in a test environment. The bug had been live since Orchard's May 2022 activation, and because of Orchard's privacy properties there is no cryptographic way to prove whether it was exploited before the fix, though Shielded Labs and the Zcash Foundation judged prior exploitation unlikely and said the network's 'turnstile' accounting confirmed total ZEC supply stayed intact. Engineers coordinated privately with miners and exchanges from May 31, shipped an emergency soft fork disabling Orchard at block 3,363,426, then re-enabled it with a corrected circuit via the NU6.2 hard fork on June 3 at block 3,364,600. It matters because the episode exposes the core tradeoff of privacy coins—the same cryptography that hides balances makes supply unauditable—and the confidential, small-group response drew criticism over centralization even as Shielded Labs proposed a further upgrade routing all Orchard coins through a new shielded pool to let anyone verify no counterfeit ZEC exists. [8][9][11][13][57]
  • The fix briefly fueled false rumors that Zcash had gone offline, after block explorers stopped showing activity post-upgrade because they were reading data from out-of-date nodes. An account called Solid Intel claimed the network produced no blocks for four hours, drawing over 180,000 views before Helius CEO Mert Mumtaz and others showed the chain was operating normally; Mumtaz also framed the underlying vulnerability as a recurring theoretical risk in most zero-knowledge privacy protocols, noting Zcash's Electric Coin Company found and remediated a separate counterfeiting flaw in 2018-2019 with no losses. The confusion coincided with a separate genuine outage at Kraken's Ink layer-2, which suffered chain-wide disruption traced to a bug in the OP-reth node client. The takeaway: privacy-pool incidents are hard for outsiders to verify in real time, amplifying FUD even when the network itself is healthy. [57][9]

Markets & Flows

  • Bitcoin slid to roughly $62,000-$63,000—down about 14%-16% on the week from above $74,000—as the AI trade that has powered global risk assets in 2026 stalled after Broadcom's quarterly AI-chip outlook missed expectations, dragging the Nasdaq lower for a third session. The selloff was led from outside crypto: South Korea's KOSPI fell 4.7% with SK Hynix off 8%, the Korean won hit a 2009 low and the Indonesian rupiah neared a record low, signaling a coordinated Asian risk-off shift. Ether dropped to about $1,696 (down 15%+ on the week), Solana fell to $66.51 (down 18.5%), and even Hyperliquid's HYPE—the lone top-10 weekly gainer—reversed 14.8% to $62.14. Structurally, U.S. spot Bitcoin ETFs logged a record 13 straight sessions of net outflows totaling roughly $4.4 billion since mid-May (with some trackers citing 15 sessions and $4.7 billion), removing a key bid just as the next test, Friday's U.S. nonfarm payrolls, could swing Fed-cut expectations under newly confirmed chair Kevin Warsh. [1][4][6][41][52]
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Sources

  1. 1CoinDesk · 2026-06-05 — Here's what could happen if bitcoin breaks below $60,000
  2. 4CoinDesk · 2026-06-05 — Bitcoin in danger of dropping to $60,000, with Zcash bulls turning their backs on ZEC
  3. 6CoinDesk · 2026-06-05 — Bitcoin plunges to near $62,000 as the AI trade unwinds, HYPE falls 14%
  4. 8CoinDesk · 2026-06-05 — Zcash plummets 30% as Shielded Labs reveals a major bug that went undetected for four years
  5. 9Cointelegraph · 2026-06-05 — ZEC drops 30% as Shielded Labs reveals more about infinite counterfeit bug
  6. 11The Block · 2026-06-05 — Security researcher finds Zcash vulnerability allowing ‘unlimited’ counterfeit minting; ZEC drops 31%
  7. 13The Defiant · 2026-06-04 — Shielded Labs Proposes New Zcash Upgrade to Prove ZEC Supply After Orchard Bug
  8. 41The Defiant · 2026-06-04 — Spot Bitcoin ETF Outflow Streak Extends to Record 13 Days, $4.4B Cumulative
  9. 52The Block · 2026-06-04 — ‘The rally that wasn’t’: Bitcoin slides 14% in one week as ETF outflows, Strategy sale and oil prices hit sentiment
  10. 57Protos · 2026-06-03 — Zcash wasn’t down — its block explorers were