Squid has moved quickly to stress that a recent $3 million exploit targeted a third party Gnosis Safe module called SquidRouterModule, not its core cross chain routing contracts, after 86 wallets on Ethereum and Base were drained in under two hours.

According to on chain security firm Blockaid, the attack centered on a Gnosis Safe module named SquidRouterModule deployed on Ethereum and Base, which was used by some multisig owners to route cross chain transactions involving Squid and other protocols.

Blockaid reported that over roughly two hours the attacker siphoned funds from 86 Gnosis Safe wallets, with total losses of about $3 million to $3.2 million, before consolidating the proceeds into a single address holding just over 3.07 million DAI.

In a detailed summary, KuCoin’s news desk cites Blockaid and Squid as saying the stolen tokens were swapped into DAI via a custom Uniswap V3 pool set up by the attacker, who then aggregated the drained funds into one wallet to simplify laundering.

The core bug sat inside the SquidRouterModule’s “message security” logic: Binance Square coverage explains that the module simply accepted a constant string provided by the caller as proof that a message was valid, which meant anyone who could see the contract code could copy the string and pass arbitrary call data.

CoinNess reports that the attacker exploited this public fixed string verification to execute arbitrary calls from the affected Safes, effectively granting themselves permission to move assets out of the multisigs without owner confirmation.

How did the SquidRouterModule exploit drain 86 Gnosis Safes?

Binance’s incident note describes it bluntly, saying the design “accepted a fixed string provided by the caller for message security,” a pattern that eliminated any real authentication and opened a direct path for draining funds from integrated wallets.

This is a known class of risk for Gnosis Safe modules, as earlier research by OpenZeppelin showed that any attached module can execute transactions from a wallet without owner approval if its internal checks are weak or misconfigured.

In this case, the unsafe module was branded with the Squid name but was developed and deployed by a third party integrator, not by the Squid team or its core protocol maintainers.

Why is Squid distancing its core router from the hack?

In an official X post, Squid stated that “this incident is unrelated to Squid’s core protocol and contracts,” and emphasized that its main routing contract, identified on chain but “was not involved in any of the malicious transactions.”

KuCoin’s write up notes that Squid clarified the SquidRouterModule “was neither developed, deployed, nor operated by them; the name was independently chosen by a third party when integrating with Squid,” and that it sits completely outside the architecture of the core router.

A credible Iran–US peace memorandum that ends the current war and reopens the Strait of Hormuz would likely bleed some “war hedge” premium out of Bitcoin in the short term, while strengthening the longer term case for BTC as states quietly diversify away from the dollar in a more multipolar Gulf.

Axios reports that US and Iranian negotiators are closing in on a one page memorandum that would end the current war and reopen the Strait of Hormuz to normal shipping, set to launch thirty to sixty days of talks on nuclear limits and phased sanctions relief.

Reuters is adding that Tehran is reviewing a US proposal under which it would cap uranium enrichment at lower levels and accept tighter inspections, while Washington would gradually ease oil and banking sanctions and allow access to parts of roughly $10 billion to $20 billion of frozen assets.

What does Hormuz opening mean for crypto?

How could an Iran peace MOU move Bitcoin in the near term?

Reporting on the economic fallout of the war notes that fears of a prolonged Hormuz disruption had added a double digit percentage “war premium” to Brent, pushing prices well above $100 and stoking stagflation worries before headlines about talks pulled crude back toward double digits.

When tail risk in energy and shipping recedes, traditional “fear hedges” like gold and, to a lesser degree, Bitcoin tend to give back some gains as capital rotates into high beta equities and credit, especially if lower oil also takes pressure off bond yields and central bank tightening.

Crypto media has already framed the Iran peace trade as a volatility catalyst: one widely circulated analysis notes that a failed April ceasefire attempt contributed to sharp swings across BTC and altcoins, and that a durable deal would likely compress implied volatility as traders unwind wartime hedges.

If Donald Trump then signs and sells the MOU as proof that “peace through strength” worked, the first order move is classic relief rally behavior where Bitcoin trades more like a high beta risk asset than a pure geopolitical hedge, meaning it may underperform the parts of the market that benefited directly from lower oil and credit spreads.

How does sanctions relief and a new Gulf order change Bitcoin’s longer term bid?

The more interesting impact is structural rather than tactical.

Investigations into Iran’s war economy have highlighted the regime’s use of crypto rails for sanctions evasion, with reports of state linked networks using Bitcoin and other coins to facilitate oil sales and move value outside the US controlled banking system.

A peace framework that unfreezes assets and relaxes oil sanctions, as described by Axios, Iran International and Arab News, reduces the immediate need for those shadow channels, which is superficially bearish for “Iran demand” but misses the bigger point about sovereign hedging behavior.

Once Iran is partially readmitted to the formal system, its leadership will be intensely aware that sanctions could snap back in any future confrontation, and that awareness usually drives diversification of reserves away from pure dollar exposure into gold, other currencies and increasingly digital assets such as Bitcoin and dollar stablecoins.

At the same time, any deal that reopens Hormuz while cementing a more multipolar Gulf order accelerates quiet experiments in non dollar oil settlement between Iran, China, Russia and their partners, and that dynamic is exactly where neutral settlement rails and crypto based instruments start to look attractive at the margins.

Analysts tracking the economic impact of the war already emphasize that the core shift is from a unipolar US security umbrella to a contested regional architecture, and in that world demand for censorship resistant, seizure resistant assets and rails tends to rise over five to ten year horizons even if near term war premia fade.

So a signed Iran peace MOU probably takes some air out of Bitcoin’s crisis hedge trade in the weeks after the announcement, but it also nudges the system toward a more fragmented, sanctions weaponized order in which states are more likely to hold, use and build around Bitcoin and crypto infrastructure as part of their long term insurance portfolio.

The ICON Network will be permanently shut down on December 31, 2026, with ICX holders given until that date to migrate at a 1:1 ratio into SODA on SODAX, after which the legacy chain will exist only as a read only archive.

In a series of blog posts, the ICON Foundation outlined a phased wind down of the ICON Layer 1 that ends with a full shutdown of the network at the close of 2026 and a transition of the ecosystem to the SODAX stack, where SODA becomes the primary token.

An earlier update confirmed that as of March 26, 2026, the ICON Network has entered “economic shutdown,” with all ICX emissions and staking rewards halted and the chain kept alive only to support migration to SODA on the Sonic network.

Key takeaways:

• Declining oil prices boosted global stock markets, helping lift Bitcoin back to $77,000 amid reduced inflation fears.
• $2.66 billion spot Bitcoin ETF outflows have kept professional crypto traders from turning resoundingly bullish.

Bitcoin (BTC) reclaimed the $77,000 level on Monday following a recovery in global stock markets. US President Donald Trump stated on Saturday that talks with Iran to reopen the Strait of Hormuz were progressing, causing crude Brent oil prices to retreat to a five-week low and setting the stage for a potential Bitcoin price run to $82,000.

Crude Brent oil futures (left) vs. Bitcoin/USD (right). Source: TradingView

Global stock markets reacted positively on Monday, with a 2.9% gain in Japan’s Nikkei 225 Index and France’s CAC 40 closing up 1.8%. Reduced inflationary pressure from oil prices caused yields on 5-year Eurozone government bonds to hit 2.64%, their lowest level in five weeks. This prospect of reduced geopolitical risk prompted investors to rotate cash positions back into bonds and equities.

Despite the overall drop in risk perception, professional Bitcoin traders refused to flip bullish.

Bitcoin 3-month futures basis rate. Source: Glassnode

Bitcoin 3-month futures contracts traded at a 2% annualized premium (basis rate) relative to spot markets, indicating a lack of demand for bullish leveraged positions. Under neutral conditions, this indicator typically ranges between 5% and 10% to compensate for capital costs. Still, one could argue that low leverage remains constructive as long as the $74,000 support holds.

Bitcoin spot ETF outflows and Strategy’s focus on reducing debt

Recent outflows from spot Bitcoin exchange-traded funds (ETFs) likely contributed to the bulls’ lack of confidence.

US-listed Bitcoin spot ETFs daily net flows, USD. Source: SoSoValue

US-listed spot Bitcoin ETFs experienced $2.66 billion in net outflows since May 7. Despite representing less than 3% of total assets under management, the shift signals fading appeal for institutional investors. Strategy’s (MSTR) pause on Bitcoin acquisitions to repurchase some of its convertible bonds has also fueled concerns.

Strategy (MSTR US) debt profile. Source: Strategy

The company held $8.7 billion in convertible debt with an average maturity of less than 4 years. Strategy’s decision to focus on Bitcoin yield per share might temporarily hold back additions to its 843,738 BTC reserves, but it benefits shareholders by reducing financial leverage and lowering potential share issuance. 

Related: Why is Bitcoin falling despite pro-crypto Kevin Warsh becoming Fed chair?

It remains unclear what could flip Bitcoin traders’ sentiment in a favorable direction, especially as the stock market—particularly the tech sector—continues to dominate investors’ attention. With earnings on the rise, Nvidia’s board approved an additional $80 billion share repurchase program, strengthening investment appeal despite a record-high market capitalization.

Bitcoin’s odds of reclaiming $82,000 likely depend on greater visibility into global economic growth prospects. A potential deal between the US and Iran is certainly a step in the right direction, but as long as spot Bitcoin ETF flows remain negative, investor sentiment may remain subdued.

Coinhouse has secured Crypto Asset Service Provider accreditation from the French AMF under MiCA, giving the Paris based firm an EU wide passport for brokerage, custody, transfers and advisory on digital assets as France’s national PSAN regime sunsets.

In a press release dated May 21, 2026, De Gaulle Fleurance said it advised Coinhouse “on obtaining its Crypto Asset Service Provider (PSCA) accreditation from the French Financial Markets Authority (AMF),” framing the approval as the culmination of a multi year compliance process that began with Coinhouse’s registration as a Digital Asset Service Provider (PSAN) in 2020.

The firm notes that the authorization was granted under the Markets in Crypto Assets regulation and that, as a result, “Coinhouse is now fully compliant with European regulatory requirements and can offer its crypto asset services across all Member States of the European Union.”

How did Coinhouse obtain PSCA status under MiCA?

Finyear reports that Coinhouse, founded in 2014 as “La Maison du Bitcoin,” received MiCA accreditation under AMF reference A2026 013, with the license allowing it to operate as a PSCA for a broad scope of activities including buying and selling crypto assets, exchanging them for funds or other crypto assets, custody and administration, and the transfer of crypto assets on behalf of clients.

On LinkedIn, Coinhouse chief executive Nicolas Louvet highlighted that the company has been granted MiCA authorization “for 7 different services, including investment advice and crypto portfolio management,” confirming that the mandate goes beyond basic brokerage and custody into higher value advisory and discretionary management.

The AMF’s public white list shows COINHOUSE SAS as an authorized crypto asset service provider in France, confirming that the firm is now one of the relatively small group of entities that have completed the MiCA licensing process ahead of the July 2026 cutoff.

De Gaulle Fleurance partner Anne Maréchal is quoted in the release as saying that obtaining PSCA accreditation “marks a crucial step for Coinhouse, which can now operate within a robust and harmonized regulatory framework across Europe” and that the case illustrates “the importance of an approach based on regulatory foresight, compliance and strategic support for players in the crypto asset sector.”

Why does this MiCA license matter in the EU timeline?

Coinhouse’s upgrade from PSAN registration to full PSCA status comes against the backdrop of a hard regulatory deadline.

The AMF reiterated in February that Digital Asset Service Providers which operated under the French national regime before MiCA must obtain PSCA authorization by July 1, 2026 if they want to keep serving clients in France; beyond that date, only MiCA authorized Crypto Asset Service Providers can legally operate.

A Cointribune analysis of the French transposition notes that “from July 1, 2026, providers not authorized as PSCAs must cease their activity in France while awaiting their authorization,” and that firms which continue to offer services without the license face up to two years in prison and a €30,000 fine under the Monetary and Financial Code.

Compliance vendor Unit21 similarly describes July 1, 2026 as “the hard cutoff that every crypto asset service provider operating in the EU needs to take seriously,” emphasizing that after that date, operating without MiCA authorization is simply illegal and that national authorities can impose fines of up to 12.5 percent of a firm’s global annual turnover for serious violations.

By securing its license more than a year ahead of that deadline, Coinhouse gains two advantages.

First, it can continue serving French clients without interruption while competitors that have not yet applied will either have to rush their files or plan an exit.

High-leverage trader James Wynn has declared that the “lottery ticket” phase of memecoins is finished, arguing the sector is now saturated and structurally tilted toward insiders at the top.

James Wynn, the hyper-leveraged crypto trader who turned a roughly $7,000 bet on Pepe (PEPE) into about $25 million before later losing close to $100 million on Bitcoin and meme coin positions, now says the memecoin dream is effectively over. In a post on X to his more than 36,000 followers, Wynn wrote, “I’m pretty sure meme coins are dead, I’m pretty confident they’ll never really come back,” arguing that what “was once a niche of a lifetime if you lived through it from 2017-2024” has been saturated by supply and financialized extraction.

He claimed that going from “a few K into a million dollars is like winning the lottery now. Borderline impossible,” framing today’s memecoin landscape as a system where “they’ll all supply controlled (yes needed), but ultimately just profit making machines for people at the top.” Wynn’s pivot comes less than a year after he allegedly amassed between $80 million and $87 million through aggressive, 20x–40x leveraged trades on Hyperliquid, at one point running a 40x Bitcoin long worth roughly $1.25 billion that briefly showed around $100 million in unrealized profit before cascading liquidations erased nearly the entire haul.

Wynn’s rise, crash, and backlash

Wynn first rose to prominence in 2023 as a “high-risk leverage trader and memecoin maxi,” after parlaying a small PEPE position into tens of millions of dollars and then recycling those gains into even larger directional bets. According to reporting on his trades, he built his fortune on the very dynamics he now criticizes: thin-liquidity tokens, community-driven hype, and reflexive leverage that could push valuations from under $10 billion toward the $100 billion range for the wider memecoin sector in a single cycle.

In May 2025, Wynn’s luck turned violently. After opening a massive 40x Bitcoin long with an entry near $107,993, his position was progressively liquidated as BTC slid below $106,330 and then toward $104,150, crystallizing losses that reports put at nearly $100 million in less than a week and marking one of the largest documented on-chain trading wipeouts. Crypto.news later detailed how, despite losing almost $100 million, Wynn quickly returned to Hyperliquid, selling about $4.12 million in Hyperliquid (HYPE) tokens and re-entering with a new 945 BTC long using 40x leverage, a position sized around $99.7 million at the time.

Community reaction to his latest comments has been sharply divided. One X user, posting under the handle @0xVengeanceArab, dismissed Wynn’s comments by referencing alleged $25 million liquidations and multiple rug-like meme launches, telling him to “just shut fuck up,” while another, @wocknottriss, wrote that the trader has “been wrong about everything in the past 11 months,” calling his bearishness on memes a contrarian bullish signal.

Traders and builders active in the space argue that what has died is not memecoins themselves, but the uniquely forgiving market structure that allowed near-random tickets to 100x with minimal diligence. An account named Pump Research wrote in reply that “Memecoins aren’t dead, the easy money phase is,” adding that “what’s dying is low-quality launches with no community” while “projects with real holders who actually believe and stick around” are the ones surviving as capital gets choosier.

Analysts tracking the sector describe exactly that polarization. Research highlighted by 0x资讯 suggests that while total meme coin market capitalization climbed from around $20 billion in 2024 to as high as a projected $140 billion, the spoils have concentrated into a handful of blue-chip names like Dogecoin (DOGE), Shiba Inu (SHIB), and PEPE, with large numbers of low-quality tokens effectively zeroed out. Crypto.news has likewise chronicled how Dogecoin’s market cap alone punched through $60 billion during the last cycle as it rallied to roughly $0.428, cementing DOGE as a structural large-cap asset even as smaller memes came and went.

Even within PEPE, where Wynn first achieved notoriety, recent coverage shows a more mature, range-bound market rather than a casino where any wallet can spin a $7,000 ticket into life-changing wealth. As of early 2026, PEPE has traded near $0.0000043, down roughly 64% over the year but still supported by around $600 million in 24-hour volume, with technical setups focused on incremental mean reversion instead of parabolic blow-offs.

Other commentators see structural changes in token design as the final blow to the old memecoin fantasy. As one account, @yourr_finans, put it, going from “2,000 to 1 million tokens did more damage than any bear market,” with “lottery odds” moving from improbable to “actual lottery odds” as supply structures and launch mechanics were optimized to extract value for insiders while stapling tokens to nominal “utility.”

For Wynn, the conclusion is that the sector “needs to evolve into something else,” even if he admits he doesn’t yet know what form that next speculative meta will take. Whether that future belongs to DOGE-scale brands, utility-wrapped memes, or entirely new cultural formats, the one constant is that the free lunch he and others feasted on from 2017 to 2024 is gone—and that the people now calling memecoins “dead” are often the same ones who helped build, and then break, the game.

In previous crypto.news coverage, the site profiled Wynn as “crypto’s boldest whale,” detailing his $1.1 billion Bitcoin perp bet on Hyperliquid and Moonpig (MOONPIG) punts that pushed the token’s market cap to about $80 million during one of its spikes. Another crypto.news report documented how Wynn’s side wallet later dumped roughly 10.9 million MOONPIG tokens worth about $120,000, underscoring the reflexive, whale-driven flows that have come to define the memecoin economy he now declares finished.

Moomoo crypto is now live in Texas, giving investors access to 52 cryptocurrencies with zero commission trading.

Moomoo announced the expansion of its cryptocurrency trading services to Texas on May 22, alongside the launch of its Direct Crypto Deposit and Withdraw feature for all US users. Texas investors can now trade 52 cryptocurrencies through Moomoo Crypto at zero commission, with a transaction fee as low as 0.49%.

“We are actively expanding access to crypto trading across the U.S. while continuing to build additional features aimed at enhancing the investing experience,” said Albi Mema, Director of Crypto Operations at Moomoo U.S. The Texas rollout extends Moomoo Crypto’s coverage to a fourth major US state, following California, New Jersey, and Pennsylvania.

What moomoo’s Direct Crypto Deposit and Withdraw feature does

The new wallet feature allows users to move supported digital assets between external Web3 wallets and their moomoo accounts in either direction. Users can bring crypto in from outside wallets, convert holdings into fiat, and deploy across moomoo’s broader lineup of equities and options within a single account interface.

Moomoo is a subsidiary of Futu Holdings (NASDAQ: FUTU). The Texas licence approval follows a graduated state-by-state licensing process requiring individual money transmitter or broker-dealer compliance before crypto trading is enabled for residents.

The launch positions moomoo to compete with retail multi-asset platforms that have struggled to retain crypto users as market conditions fluctuate. Crypto.news has reported on Robinhood’s Q1 2026 crypto revenue falling 47% year over year, highlighting how volatile digital asset trading volumes can be across retail platforms. Moomoo’s all-in-one strategy, bundling crypto with equities and options in a single account, is designed to reduce that cyclical exposure.

What the Texas launch adds to moomoo’s US crypto strategy

Texas is one of the largest retail investment markets in the United States by total brokerage account volume. Adding the state brings moomoo’s crypto service to four of the most active retail trading states in the country. Crypto.news has tracked how competing retail platforms are pursuing similar multi-asset consolidation strategies to maintain user engagement through market cycles.

The platform is offering a limited-time Bitcoin rewards programme for new crypto users as part of the Texas launch. The Bitcoin (BTC) price page tracks live movements for users who take up that programme during the launch window.

MoonPay ChatGPT app is now the first crypto onramp inside OpenAI’s platform, supporting Bitcoin, XRP and Solana.

MoonPay launched a dedicated app inside ChatGPT’s App Store on May 22, allowing users to generate cryptocurrency purchase links without leaving OpenAI’s chatbot. The company called itself “the first and only crypto onramp integrated in ChatGPT” in its announcement post.

The integration supports Bitcoin, XRP, Ethereum, Solana, USDC, and more than 100 other digital assets across more than 30 chains. Users complete KYC and payment on moonpay.com after the chatbot generates a checkout link, with payment options including card, Apple Pay, Google Pay, and bank transfer.

Bitcoin is facing a renewed supply test as on-chain dynamics show rising balance on spot venues and ongoing ETF outflows. In the latest week, exchange netflows rose by roughly 18,000 BTC, while spot BTC exchange-traded funds logged net outflows of nearly 16,000 BTC, a combination that produced around 34,000 BTC of local selling pressure across venues.

Axel Adler Jr., a BTC researcher, said the data point to a persistent local supply imbalance even as price movements suggested a rebound. “BTC exchange and ETF activity continue to show a local supply imbalance,” Adler noted in his assessment of the week’s flow figures, underscoring that the pressure could resurface if absorption by buyers does not improve. He added that the weekly netflows imply that the market may need a shift back toward neutral or negative exchange balances before sustained upside momentum can take hold. Read his full analysis.

Bitcoin weekly exchange netflows. Source: CryptoQuant

The same period also saw spot ETF activity retreat, with net outflows of around 16,000 BTC. Adler noted that institutional flows did not absorb the exchange supply as hoped and, instead, reinforced a risk-off mood that can cap rallies in the near term.

The magnitude of the combined pressure—roughly 34,000 BTC across exchanges and ETFs—highlights the fragility of near-term upside without stronger spot demand. As Adler framed it, the market faces a critical test: can buyers step in sufficiently to absorb ongoing inflows and prevent a renewed slide in supply pressure?

Bitcoin open interest, CVD, and funding dynamics. Source: Velo chart

The wider market context added to the caution. Glassnode analyst cryptovizart pointed out that daily ETF trading volume has cooled to below $20 billion, down from more than $50 billion in late 2025. The softer activity in traditional finance channels suggests fading speculative demand through these venues and weaker spot absorption during rallies. Read the note.

Key takeaways

• Weekly BTC exchange netflows rose by about 18,000 BTC, while spot BTC ETFs logged roughly 16,000 BTC in net outflows, creating ~34,000 BTC of near-term selling pressure.
• Institutional ETF activity has cooled, with daily ETF trading volume dipping below $20 billion from above $50 billion in late 2025, signaling fading speculative demand through traditional channels.
• Open interest on BTC futures declined to about 250,000 BTC during the rebound, before ticking up to roughly 254,000 BTC, suggesting that the rally was driven largely by short-covering rather than new bullish positioning.
• Funding rates cooled to around 0.0026, remaining in positive territory, indicating less crowded long leverage even as the market experiences intermittent pressure.
• Analysts highlight a mixed signal: while some metrics show cooling selling pressure, sustained upside will likely depend on a renewed burst of spot demand and a rise in open interest toward the $80,000 level.

Derivatives dynamics and the path to momentum

The rebound rally toward the $77,800 area came after a brief dip below $75,000, aided in part by a shift in risk appetite following reports of a potential US-Iran peace deal. On-chain and derivatives data paint a picture of a cautious market where buyers have not yet fully absorbed supply. Aggregated Bitcoin open interest fell from about 268,000 BTC during the dip and then hovered near 254,000 BTC, signaling that the move higher was largely driven by short-covering rather than a broad reloading of bullish bets.

Meanwhile, the aggregation of funding rates softened during the advance, sliding to around 0.0026 from earlier peaks near 0.008—still positive, but a sign that long positions are less crowded than in prior rallies. A separate perspective from Rei Researcher on CryptoQuant notes that the daily funding rate has remained negative since February 2026, implying ongoing pressure from short traders in the shorter horizon. Taken together, these signals suggest BTC is stabilizing around the mid-to-upper $70k range even as near-term headwinds persist.

BTC price, spot CVD, aggregated open interest, and funding rate. Source: Velo chart

In the broader context, Glassnode reported that spot CVD and futures CVD metrics have moved higher—up 77.2% and 35.5% respectively—while price momentum softened. The development underscores a market where selling pressure is easing somewhat on a relative basis, but real momentum will likely require a renewed influx of spot demand and a climb in open interest.

Volatility, risk, and what to watch next

Looking ahead, the critical question for BTC remains whether fresh buyers can step in to absorb ongoing exchange and ETF flows. If spot demand fails to strengthen or if open interest fails to rise in tandem with price, the current relief rally risks stalling or reversing. Observers will be watching for shifts in ETF activity, potential catalysts that can restore risk appetite, and any signs that institutional sentiment is ready to re-engage spot markets on a larger scale.

The market still faces a delicate balance between supply pressure and demand absorption. If buyers re-enter with conviction and open interest climbs toward the levels that historically accompany durable upswings, BTC could eye the $80,000 mark in the months ahead. Until then, the data suggests a cautious stance: a quieting of selling pressure at the margin, paired with a need for stronger spot demand to convert relief rallies into sustainable upside.

The early mythology of crypto painted hackers as digital outlaws — anonymous figures draining protocols overnight and disappearing into the shadows forever. But decentralized finance has evolved into something stranger. Today, many DeFi exploiters do not simply steal and vanish. They negotiate. They send messages. They return partial funds. Some even attempt to reinvent themselves as “security researchers” after causing hundreds of millions in damage.

In traditional finance, bank robbers do not usually open dialogue with the institutions they rob. In DeFi, however, exploiters often become reluctant diplomats, engaging in public negotiations through blockchain transactions, governance forums, and encrypted chats. The line between criminality and opportunism becomes blurry, creating a psychological gray zone unique to crypto culture.

The result is one of the most underrated dynamics in Web3: DeFi exploits are not only technical events — they are social and psychological performances.

The Rise of the Negotiated Hack

One of the most unusual aspects of DeFi exploits is how often attackers return part of the stolen funds. In some cases, protocols recover nearly everything after offering a “bug bounty” to the exploiter. In others, attackers keep a percentage while returning the rest as part of an informal settlement.

This behavior seems irrational at first glance. Why would someone capable of stealing millions willingly give money back?

The answer lies in the structure of blockchain transparency.

Unlike traditional financial crimes, most DeFi exploits happen in public. Every transaction is visible. Wallets are traceable. Blockchain analytics firms monitor movements in real time. The exploiter may be anonymous, but the stolen assets themselves become radioactive. Moving large amounts of stolen crypto without detection is extraordinarily difficult.

As a result, many attackers eventually face a psychological pivot:

• Keep all the funds and become globally hunted
• Or partially cooperate and reshape the narrative

That second option has created a bizarre middle ground where exploiters attempt to transition from villain to negotiator.

The “Whitehat” Narrative

Crypto has developed a peculiar moral loophole: the “whitehat” claim.

After draining protocols, some attackers argue they were merely exposing vulnerabilities. They frame themselves not as thieves, but as security experts forcing the industry to improve. Even when exploits cause chaos, panic, and liquidity collapse, the attacker may later claim their intentions were protective.

Sometimes this narrative is partly true. Ethical hackers have historically uncovered vulnerabilities and received legitimate bug bounties. But DeFi blurred the distinction between responsible disclosure and financially motivated exploitation.

An exploiter may:

• Drain funds first
• Negotiate afterward
• Return some assets
• Then request immunity and rewards

In essence, they retroactively rewrite the story.

The psychology here is fascinating because it reflects a desire for legitimacy. Many exploiters do not want to see themselves as criminals. They prefer to imagine themselves as elite actors operating outside flawed systems. By adopting the “whitehat” label, they seek social validation from the same industry they attacked.

This becomes especially powerful in crypto because the ecosystem often celebrates technical brilliance, even when it appears in destructive forms.

Reputation Laundering in Web3

Traditional criminals hide their identities. Crypto exploiters sometimes build brands.

This phenomenon could be called reputation laundering — the process of transforming public perception after an exploit through selective cooperation, philosophical messaging, or strategic fund returns.

Some attackers publish manifestos explaining why the protocol “deserved” to be exploited. Others portray themselves as antiheroes, exposing greed, centralization, or weak security practices. A few even become respected figures later in the industry under new pseudonyms.

In Web3 culture, technical competence can sometimes overshadow ethics.

An exploiter who demonstrates exceptional blockchain knowledge may gain a strange form of admiration online. Communities occasionally romanticize them as genius coders rather than financial predators. This creates an environment where attackers may feel incentivized to manage their public image rather than simply escape.

The blockchain itself becomes a stage.

Every on-chain message, wallet interaction, or negotiation is watched in real time by the crypto community. Exploiters know this. Protocol teams know this. The audience becomes part of the psychology.

On-Chain Negotiations: Diplomacy Through Wallets

One of the most surreal developments in DeFi is the emergence of on-chain diplomacy.

Instead of courtroom negotiations, conversations happen through:

• Blockchain transaction messages
• Governance proposals
• Public wallet communications
• Twitter posts
• Forum threads

Protocols have openly negotiated with attackers, offering immunity deals or bounty agreements if funds are returned. In some cases, exploiters counteroffer.

The dynamic resembles hostage negotiation more than cybersecurity.

Why does this happen?

Because DeFi lacks many traditional enforcement mechanisms. Smart contracts operate globally, often without centralized control. Legal systems move slowly across jurisdictions, while crypto moves instantly. As a result, protocols frequently prioritize fund recovery over punishment.

This creates a psychological power shift.

The exploiter temporarily controls leverage, while the protocol attempts persuasion rather than force. Both sides understand that a partial recovery may be preferable to a total loss.

Ironically, decentralization unintentionally created environments where negotiation often becomes more practical than absolute justice.

The Ego Factor

Many DeFi exploits are not purely financial. Ego plays a major role.

Attackers often leave clues, messages, memes, or taunts. Some appear to enjoy demonstrating superiority over protocols managing billions in user funds. The exploit becomes proof of intellectual dominance.

In psychology, this resembles a performance of mastery.

The attacker is not only extracting money — they are proving they can outsmart entire teams, audits, and ecosystems. Public attention amplifies this behavior. Every exploit instantly becomes headline news across crypto Twitter, Telegram, and Discord.

For certain personalities, the recognition itself becomes rewarding.

This may also explain why some exploiters negotiate publicly instead of disappearing quietly. Remaining engaged keeps them central to the narrative. It transforms the event into an ongoing spectacle where the attacker maintains influence long after the initial exploit.

Why DeFi Keeps Repeating the Cycle

The uncomfortable truth is that crypto culture sometimes unintentionally reinforces these dynamics.

Protocols often:

• Celebrate returned funds as “successful resolutions.”
• Offer large bug bounties after attacks.
• Avoid aggressive legal escalation.
• Publicly thank exploiters for cooperation.

While understandable from a recovery standpoint, these responses may normalize exploit-driven negotiation strategies.

Attackers observe previous cases and learn:

• Exploit first
• Negotiate later
• Keep a percentage
• Rebrand afterward

This creates a dangerous incentive structure where gray-hat behavior becomes strategically attractive.

The industry may eventually need to confront a difficult question:

At what point does rewarding exploiters encourage the very behavior protocols claim to oppose?

The Human Side of Decentralized Crime

DeFi exploits are often discussed purely in technical language:

• Flash loans
• Oracle manipulation
• Reentrancy attacks
• Bridge vulnerabilities

But behind every exploit is human psychology:

• Fear
• Ego
• Rationalization
• Reputation management
• Social influence
• Moral ambiguity

That human layer is what makes DeFi exploits uniquely fascinating.

The blockchain did not remove human behavior from finance. It amplified it in public view.

Every exploit becomes more than theft. It becomes negotiation theater — a live demonstration of how anonymity, incentives, transparency, and online culture reshape morality in digital economies.

And perhaps that is the strangest part of all:

In crypto, hackers do not always want to disappear.

Sometimes, they want to be understood.

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