The more it gets banned, the more it rises? Uncovering the black and white truth behind XMR's surge

Article: Frank, PANews

XMR (Monero), one of the leading privacy coin contenders, hit a new all-time high on January 13, with spot prices surpassing $690, reigniting market discussions about privacy coins.

Since January 2025, nearly a year ago, XMR has surged from around $200, with a maximum increase of 262%. In a context where mainstream altcoins are generally weak, such a rise is extremely rare. Even more intriguing is that this rally occurred amid unprecedented global regulatory tightening.

Due to compliance pressures, major centralized exchanges like Binance have already delisted spot trading of XMR. On January 12, the Dubai Virtual Assets Regulatory Authority (VARA) officially announced a ban on the trading and custody of privacy tokens across Dubai and free zones. However, this ban not only failed to cast a shadow over XMR but also went against the trend, setting a new high and mocking the Dubai government.

In the face of liquidity drying up on exchanges and regulatory sticks waving, who is the real driver behind XMR’s rise? PANews strips away the surface to explore the true demand behind this round of market movement.

Exchanges Are Not the Core Price-Setting Venue

Despite the hot market, this is not driven by funds within exchanges.

In the spot market, recent trading volume has increased somewhat with the price rally but remains within the range of tens of millions to 200 million USD, without any particularly exaggerated growth. Historically, the actual and significant peak in spot trading volume was on November 10, with $410 million. This indicates that in this recent doubling phase, spot trading (or spot buy orders on centralized exchanges) is not the main force behind the rally.

In the derivatives market, the situation is similar. The peak trading volume also occurred on November 10. Since then, until about a week ago, derivatives trading volume has not shown a clear surge and even showed signs of decline. Observing open interest data, the USD-denominated change curve almost perfectly overlaps with the price trend. The amount of XMR held in the market has not experienced abnormal spikes; the increase in open interest is merely due to the rising price, not large-scale new capital entering to open positions.

Clearly, mainstream exchanges are not the core price-setting venues for XMR at present.

Hidden Currents on the Supply Side: Miner Reshuffling and Pre-Positioning

Since the “visible” funds are unremarkable, we need to turn to the “hidden” on-chain world. As a privacy-focused network, XMR has minimal exploitable information, but changes in mining difficulty and rewards can give us clues about capital deployment on the supply side.

Mining difficulty historically reflects the enthusiasm of capital participation in the network ecosystem. Data shows that XMR’s mining difficulty began to rise rapidly at the end of 2024, maintaining a fast growth throughout the first half of 2025. Although there was some fluctuation from September to November, a new round of difficulty increase has recently begun.

A noteworthy episode: in September, the Qubic project claimed control of over 51% of the total network hash rate and conducted a “demonstration attack,” causing an 18-block chain reorganization. This event sounded an alarm in the community, prompting many miners to migrate their hash power to the established pool SupportXMR. This turbulence was a major reason for the sharp fluctuations in mining difficulty at the end of 2025 but also indirectly confirmed the activity and resilience of the hash market.

More interesting is the linkage between mining rewards and difficulty.

Before April 2025, Monero’s mining rewards experienced a clear decline. Coupled with the difficulty chart at the time, where hash power surged sharply but the price remained volatile, this divergence led to thinner rewards, possibly forcing some high-cost small miners to exit. Data shows that mining difficulty briefly retreated in April, supporting this hypothesis.

This was a typical “miner capitulation” and “chip exchange.” Afterward, as prices surged significantly, both mining rewards and difficulty once again moved in sync. From the data during this phase, it appears that as early as the beginning of 2025, some risk-resistant large miners or capital had already started pre-positioning in Monero mining at low yields.

Demand-Side Validation: Privacy Commands a High Premium

If miners represent supply-side confidence, then average transaction fees most truly reflect user demand.

From the chart, Monero’s average transaction fee remained relatively stable before the first half of 2025, generally below $0.1. But starting in June, an upward trend emerged; by December 11, the highest average fee exceeded $0.3, more than tripling compared to six months earlier.

Because Monero has a dynamic block size expansion mechanism, surging fees indicate that many users are trying to send transactions quickly and are willing to pay high fees to compensate miners for expansion costs. This indirectly proves that from the second half of 2025, real on-chain transaction demand on Monero has increased significantly.

Interestingly, we also observe a pattern: surges in on-chain fees often coincide with sharp price increases.

For example, on April 28, XMR suddenly rose 14%, and the average transaction fee spiked to over $0.125; during the subsequent slow price climb, fees fell back to lows (as low as $0.058 on May 4). This suggests that while market volatility can temporarily boost on-chain demand, once volatility subsides, demand also calms down. Although sometimes the two are not perfectly synchronized (e.g., on May 14, fees increased but prices did not move), overall, in the past six months, short-term price increases have driven on-chain demand, and genuine growth in on-chain demand has, in turn, fueled market optimism—both are causally linked.

The Dual Reality

Based on the above data, the recent surge in XMR may have a “dual nature.”

The “white” side is the “counter-fragile” rebound of privacy demand under regulatory pressure.

Regulatory counter-moves are becoming more evident. The VARA ban in Dubai not only failed to crush XMR but also made market participants realize that regulators can ban exchanges but cannot prohibit the protocol itself. When major exchanges exit XMR trading, the logic of market-making and derivatives pricing is rewritten, and XMR reverts to a mode controlled by real users or heavyweight players. Once outside the exchange system, privacy coins have stepped into an independent rhythm, separate from mainstream markets.

The “black” side is the capital game under information asymmetry.

Behind this opacity, there may be “whales” lurking. The unremarkable trading data (even on January 13, when the price hit a new high, derivatives open interest was only $240 million, with liquidation volume just over $1 million) suggests that mainstream institutions almost failed to predict and participate in this rally in advance, only following the trend.

This information gap held by a few causes extreme price volatility. When the market begins to focus on such rallies, it often signals short-term emotional overheating. For example, after the privacy coin ZEC surged in November, it retraced over 50%. Ultimately, in the privacy coin market, there is a significant “information asymmetry,” putting ordinary retail investors at a severe disadvantage.

In the intense fluctuations of privacy coins, on-chain data may be our only reliable guide. But in the deep, opaque ocean, high premiums for freedom always come with unknown risks.