ZEC, one of the market’s leading privacy tokens, has surged to a three-year high. The token has soared 83% in the past 24 hours alone, making it the day’s best performer. Over the past week, it has outperformed other privacy-focused cryptocurrencies with a 150% gain.
However, there is a catch. On-chain signals suggest that ZEC’s rapid climb may be pushing into unsustainable territory, as on-chain data begin to reflect euphoric levels that often precede corrections.
Grayscale Sparks ZEC Frenzy With New Trust
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ZEC’s 83% uptick in the past day follows Grayscale’s launch of its Zcash Trust to eligible accredited investors. This trust provides exposure to the meme asset as a security, negating the need for investors to buy, store, or secure the token directly.
While this has spurred a significant rise in the demand for ZEC, pushing its price to a multi-year high, risks abound.
Market Uncertainty Could Test ZEC’s Rally
ZEC’s social dominance has skyrocketed to a five-year high, standing at 1.21% at press time according to Santiment’s data.
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This metric measures an asset’s share of online discussions compared to the total conversations around the top 100 cryptocurrencies by market capitalization. A surge in social dominance indicates that discussions about ZEC are now significantly louder relative to the broader market.
Historically, when an asset’s social dominance climbs to multi-year highs during a rally, it often signals overvaluation. Such spikes suggest the asset is over-hyped and that the market is becoming crowded, raising the risk of a ZEC price correction in the near future.
Adding to this concern, ZEC’s aggregated funding rate across major exchanges has shown instability over the past week. This volatility indicates that traders have not established a clear directional bias, with long and short positions alternating dominance.
This instability reflects uncertainty around price sustainability, suggesting that ZEC’s rally might be more influenced by speculative positioning than consistent bullish sentiment. Should the current market sentiment shift, ZEC could be exposed to significant price swings.
ZEC Could Plunge Toward $112 If Hype Fades
If the current hype surrounding ZEC subsides without sustainable demand backing it, the token risks retracing some of its gains. Analysts suggest that if the market sentiment wanes, ZEC could drop towards its support level at $134.48. Should this floor fail to hold, further declines could see ZEC plunging to around $112.72.
However, if the bullish momentum can hold, some analysts believe ZEC may extend its rally above $161.35, suggesting a dynamic interplay between market enthusiasm and underlying risk factors.
