Alpha Recap #29: Zcash Vulnerability, OAK Research Portfolio Repositioning, and the Impact of STRC's Decline

The Alpha Recap is your weekly roundup of the most important crypto market alphas. Every Friday, we distill the most valuable insights from our Alpha Feed.

Exclusive to OAK Premium members, the Alpha Feed brings together market insights, yield and airdrop strategies, and key market intelligence. In short, it's the DNA of OAK Research: curated content that cuts through the noise.

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A Look at Zcash, and What It Reveals About the State of On-Chain Protocols

This is the kind of story that, beyond the protocol involved, raises a much broader question for the entire ecosystem. This week, Taylor Hornby, a seasoned Zcash researcher, uncovered a critical vulnerability in the Orchard pool using Claude Opus 4.8, in its version reserved for security researchers.

In plain terms, two lines of code made it theoretically possible to mint unlimited ZEC, and had been sitting there since the pool's deployment in May 2022. Orchard is the most widely used of Zcash's three shielded pools, and had already been audited multiple times by human experts. In other words, what three years of audits had failed to catch, the AI found in a single prompt.

The vulnerability has since been patched, with nodes successively deploying a soft fork followed by a hard fork. But one question lingers: was the flaw ever exploited? By design, the zero-knowledge proofs that underpin Orchard's privacy make any retroactive verification impossible. The turnstile mechanism rules out a large-scale exploit, but not gradual extractions over three years. The truth is, no one will ever know for certain whether someone took advantage of it. ZEC's price, for its part, didn't dwell on that nuance.

The key takeaway, in our view, extends well beyond Zcash. When Taylor Hornby ran the same audit using Claude Opus 4.7, he simply couldn't identify the vulnerability. The gap between two successive iterations of the same model illustrates just how significantly the leading AI systems are beginning to outperform human auditors in this domain.

Given Zcash's security-first approach, it's entirely plausible that other protocols considered rock-solid harbor similar vulnerabilities. Human audits alone will soon no longer be enough, and this case makes that point with striking clarity.

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APYX: Watch Out for the Risks Tied to STRC's Decline

For the first time since 2022, Strategy sold some of its Bitcoin. Just 32 coins, a negligible amount relative to its holdings, but enough to trigger a confidence shock far beyond the actual value at stake. Michael Saylor's firm has built its entire identity around one simple, absolute principle: "never sell your bitcoins."

This first breach in three years, driven by liquidity needs tied to dividends on its preferred stock STRC, says something significant about the true state of Strategy's internal mechanics.

As a reminder, STRC is a perpetual, variable-rate preferred stock designed to trade around a $100 target, currently carrying an 11.5% rate. Since May 14, Bitcoin's drop below $80,000 has pulled STRC down with it, which has now fallen below $92.

This is where things get more concerning for DeFi. APYX, the protocol most exposed to STRC with $637 million in TVL ($720 million at the start of the week), built its synthetic stablecoin apxUSD with over 60% STRC collateralization. Since the depeg, apxUSD has been trading around $0.95, with a solvency buffer reduced to 0.38% (based on calculations as of June 3).

Ultimately, should we be worried? We've laid out our full take in the Alpha Feed.

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[PORTFOLIO] We're Taking Profits on HYPE and Adding to Our Bitcoin Position

Last Thursday, we flagged the risk of continued Bitcoin weakness if it failed to reclaim $75,000 before the weekly close. Seven days later, the market found our first area of interest after an approximately 11% decline. The scenario played out faster than expected, and we hope our analysis helped Premium members navigate this stretch with a bit more clarity and peace of mind.

What makes this week stand out is the contrast with Hyperliquid. Over the same period, HYPE climbed roughly 25% and hit a new all-time high, right as the rest of the market was falling apart.

This divergence had a direct impact on our portfolio structure, and we decided to act accordingly. In a dedicated Alpha published this week, we break down the moves we made, the levels that guided our decisions, and how we're thinking about the weeks ahead if market conditions continue to deteriorate.

For those looking to position themselves intelligently on Bitcoin, the OAK Index remains your best friend.

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