Quick overview

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Zcash has lost more than 17% last week. The stagnation in shielded pools and the crowded retail demand- potentially acting as exit liquidity for large wallet investors aiming to take profits- are behind the privacy coin’s second consecutive bearish week.

 

Reduced demand is signalled by inactivity in shielded ZEC pools. The nearly 1000 per cent rally between September and October was driven by a surge in demand for ZEC as a privacy coin. Shielded ZEC tokens in the Orchard pool surged during the rally, according to ZECHUB data,  effectively reducing supply and creating a positive feedback loop to boost demand.

However, after reaching a peak of 4.21 million ZEC tokens on November 4, the Orchard pool has plateaued, indicating a decline in demand. If the plateau persists, ZEC prices might face further downward pressure due to a lack of new demand. Retail demand for Zcash is rising despite a decline in on-chain activity, allowing savvy investors to lock in profits.

According to CryptoQuant’s data, retail volume is overheating the futures and spot markets, leading to crowding in the purchase of privacy coins. Sharp corrections in cryptocurrency assets are often triggered by increased retail activity; this was seen during the cycle tops in May and November of 2021.

ZEC futures Open Interest (OI) has decreased 7.71 per cent over the past day, down to $977.4 million, according to CoinGlass data. A drop in futures OI indicates traders are reducing their capital exposure in case of a pullback or other uncertain events.