Zcash tumbled 16% in 24 hours after failing to sustain gains above $400, with the privacy coin now trading at $339 and testing critical support levels. The sharp reversal marks a dramatic shift from the token's 700% rally between September and November that peaked near $736.
The decline accelerated after ZEC's historically negative correlation with Bitcoin, which protected the privacy coin during broader market weakness, turned into a structural disadvantage.
The one-year Pearson correlation coefficient between ZEC and BTC sits at negative 0.06, meaning the assets typically move in opposite directions.
Bitcoin's recent recovery above $89,000 has left Zcash unable to benefit from improved market sentiment. Conversely, if Bitcoin weakens, ZEC could rally, but without guarantee of sustained strength given collapsing buying pressure.
What Happened
Long traders face elevated liquidation risk with $17.49 million in contracts exposed if ZEC drops to $300 or below. This liquidation cluster represents a critical pressure point that could trigger cascading forced selling.
Exchange outflows, a proxy for buying demand, collapsed 97% between December 1 and December 2, plummeting from $61.06 million to just $1.74 million. This signals traders who accumulated aggressively during the October-November rally have suddenly stepped back.
Technical indicators show ZEC hovering near the $344 support level after its steep decline from intraday highs. The 20-day exponential moving average is closing in on the 50-day EMA, with a bearish crossover potentially confirming loss of momentum.
Regulatory pressures contributed to selling intensity after South Korean exchange Bithumb delisted ZEC on December 1, citing compliance risks. The move compressed liquidity despite Zashi wallet reaching 1.2 million downloads.
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On-chain data reveals shielded pool activity plateaued at 4.21 million ZEC tokens in early November after surging during the rally. The stagnation signals declining demand for privacy features that initially drove the token's outperformance.
Why It Matters
The reversal demonstrates how alternative cryptocurrencies with inverse Bitcoin relationships can face amplified volatility when market dynamics shift. ZEC's negative correlation provided protection during Bitcoin weakness but now prevents the privacy coin from participating in broader market recoveries.
If bearish momentum continues, ZEC could test the critical $300 support where the $17.49 million liquidation cluster sits. Breaking this level would likely push prices toward $260 as forced selling intensifies through feedback loops that discourage new long exposure.
However, stabilization at $344 could enable a recovery attempt toward the $403 resistance level. A successful breakout above this threshold would invalidate the bearish thesis and restore confidence among leveraged traders.
The decline occurs despite Grayscale filing to convert its Zcash Trust into a spot ETF, the first privacy coin ETF attempt. The $137 million trust holds 2.3% of ZEC supply, but institutional momentum has failed to offset technical selling pressure.
Technical analysts note the broader three-month gain still exceeds 780%, suggesting the current weakness may represent profit-taking after an extreme rally rather than fundamental deterioration in Zcash's privacy infrastructure development.
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