Galaxy Digital research analyst Will Owens describes ZEC as an emerging alternative to Bitcoin for users prioritizing transaction privacy. The privacy-focused cryptocurrency has climbed from $40 to $396 over the past two months, representing nearly a tenfold increase. Zcash reached a seven-year peak of $376 in October.
The Appeal of Zcash's Privacy Features
Owens noted in a Tuesday report that Zcash advocates frame it as encrypted Bitcoin, appealing to cypherpunk principles amid growing monitoring of blockchain transactions. The network enables users to shield transactions through zero-knowledge proofs, offering anonymous activity that resonates with those concerned about on-chain surveillance.
Critics argue that Bitcoin exchange-traded funds have increased intermediation through centralized custodians, moving the asset away from its electronic cash origins. This dynamic has elevated Zcash's appeal as a spiritual successor that maintains decentralized principles.
Zcash's Design and Bitcoin Similarities
ZEC inherited key design elements from Bitcoin's codebase, including a 21 million supply cap, proof-of-work consensus mechanism, and halving schedule that cuts issuance rates every four years. The privacy features directly address limitations that Bitcoin's pseudonymous creator, Satoshi Nakamoto, acknowledged regarding transaction transparency.
Challenges for Bitcoin Privacy Strategies
Bitcoin users historically relied on CoinJoin privacy strategies, where multiple users combine funds into single transactions to obscure flow tracking. U.S. wallets offering such services have faced mounting regulatory pressure. Samourai and Wasabi, two prominent privacy wallet providers, have encountered enforcement actions.
Federal prosecutors announced this week they are pursuing maximum sentences against Samourai founders Keonne Rodriguez and William Lonergan Hill. The pair were arrested last year and have pleaded guilty to conspiracy charges related to operating an unlicensed money transmitter.
Wasabi preemptively banned U.S. customers and closed its privacy-preserving service one month after Samourai's founders were arrested. Owens emphasized that Zcash's fundamentals have not changed recently, but perceptions surrounding its technology have shifted.
Growing Support and Network Effects
Prominent crypto figures, including Mert Mumtaz, CEO of Solana infrastructure firm Helius Labs, have provided vocal support. Mumtaz stated that promoting privacy tools improves the privacy properties of these systems. The shielded pool mechanism creates network effects, where privacy strengthens as more users participate.
Owens wrote that the larger the shielded pool, the harder it is to trace flows, noting that 30% of Zcash supply has become shielded. A bigger anonymity set equals stronger privacy. Funds entering the same pools become harder to trace as the anonymity set expands.
Zcash's Market Position and Broader Privacy Coin Trend
With a total market capitalization of $6.5 billion, Zcash ranks as the largest privacy-focused cryptocurrency. Its main competitors, Monero and Litecoin, hold market caps of $6.44 billion and $6.43 billion, respectively. The renewed interest in privacy coins extends beyond Zcash, with DASH surging 162% to $122 over the past week and Decred jumping 139% to $41 during the same timeframe.