Privacy Coins Lose Momentum
Privacy coins have experienced a significant loss of appeal, with over 95% of these assets trading in the red. Zcash (ZEC) has been at the forefront of this decline, highlighting that the privacy narrative alone was insufficient to sustain liquidity beyond short-term price pumps.
Zcash (ZEC) led the losses among privacy coins, underscoring the fleeting nature of the narrative's appeal. ZEC experienced a sharp decline, shedding over 25% of its value in a single day, following a period where it had been the most actively traded asset.
The recent streak of losses for ZEC has been extended, accompanied by significant long liquidations.
The rally in ZEC had shown several indications of slowing down and ultimately concluded amidst a broader market correction.
Privacy tokens as a whole have seen their value diminish, resulting in a collective market capitalization of just over $15 billion. ZEC had previously ascended to become the second-largest asset in this category, with Monero (XMR) holding the top spot. Currently, Monero is trading closer to its typical range, having lost only 4% of its value in the past day.
Data from Cryptorank indicates that 98 out of 104 privacy coins and tokens are currently experiencing a decline. This widespread downturn suggests that the enthusiasm surrounding privacy coins was short-lived and primarily driven by price speculation. Despite the real-world utility of privacy-enhancing technologies, many of these coins have failed to recover to their all-time high valuations.
Can ZEC Stage a Recovery?
ZEC has fallen to $324.31, trading in proximity to its all-time high. At its current valuation, ZEC is approximately 60% below its peak, entering a range where predictions of a relief rally are being made. During its initial surge, ZEC was unable to surpass the $1,000 mark, despite expectations that it might reach this price early in the following year.
Trading activity for ZEC is highly concentrated, with 35% of all transactions occurring on Binance. This concentration means that a price pump for ZEC is potentially feasible, influenced by the available USDT liquidity.
In early November, ZEC demonstrated its ability to dip to the $440 range and subsequently rebound to new peaks above $700. However, on this occasion, ZEC has failed to hold its previous support level, taking a longer time to retrace its prior price gains. ZEC has experienced a decline in trader confidence, and retail investors remain underwater, which could potentially lead to capitulation.
There are numerous skeptics regarding the narrative that ZCash could eventually replace Bitcoin, which may contribute to a rotation of liquidity away from privacy coins. Nevertheless, in the short term, ZEC may still see a recovery to a higher price range.
Shielded ZEC Holdings Remain Strong
A significant aspect of the ZCash narrative is the potential for shielded coins to provide a stable base of holders. A total of over 4.79 million ZEC are currently shielded across three primary pools, and these coins are not typically sent to exchanges.
Furthermore, Cypherpunk Technologies has amassed a modest treasury of 233,644 ZEC. The total supply of ZEC is approximately 16.41 million, leaving sufficient supply for trading activities. However, ZCash faces considerable challenges in competing with Bitcoin's established infrastructure, both in mainstream and decentralized trading environments.
Only 1,412 ZEC have been wrapped into ZenZec tokens for use within Solana-based decentralized finance (DeFi) applications. ZEC also records around 7,000 daily transactions, marking a substantial decrease in activity since the coin's price reached its zenith. Following this record of transaction volume, ZEC activity has returned closer to its baseline levels.