ZCash: Best Privacy Tech in Crypto. So Why Isn't the Price Higher?
With apologies in advance if we buried the lead: ZCash may very well be the most technically sophisticated privacy coin out there. Take privacy coins out of the mix, maybe even crypto aside, ZCash has one of the strongest technical resumes of any cryptocurrency out there. And that may be why it has mattered about as much as it should have.
ZEC is trading just over $234 as of March 31st. Its market cap of nearly $4 billion leaves it at #25 by market cap.
That's fine. It's not nothing. But for a project that pioneered zero-knowledge proofs in cryptocurrency and today offers by most measures the strongest privacy protections of any cryptocurrency, it's a severe mismatch between narrative and reality on the valuation front.
For years ZCash fans have shrugged their shoulders at the coin's price performance and explained that the best technology always wins. The numbers suggest technology hasn't been enough... yet. If you've been paying attention to ZEC news leading up to this moment, you understand why. Let's dive into what we mean.
ZCash: The Numbers Don't Match the Narrative
What has ZCash done for itself, technologically speaking? The ZCash blockchain introduced shielded transactions using zk-SNARKs, otherwise known as zero-knowledge proofs. That means users can send transactions without revealing sender, receiver, or amount. Current on-chain data shows steady growth in use of ZCash's shielded pool, a proxy for on-chain privacy adoption.
Most people don't realize institutions can't simply throw cryptocurrencies into their portfolios. Companies like Fidelity and Coinbase Custody have to become custodians with the relevant regulators first. Morgan Stanley mentions those three companies by name in its updated S-1 filing to the SEC detailing its spot Zcash ETF, signaling institutional interest that no other altcoin can point to.
Point blank: none of the above has led to a zcash price that matches ZCash's actual technical standing in the world today. If privacy tech alone was driving the value proposition here ZEC would trade well north of $234.
Open Interest in ZEC futures contracts spiked double digits over the last 24 hours of March 25 according to Coinglass. Reports suggest the coin is mostly in retail hands driving the price up. Still, ZEC tried to break out from its longtime $250 resistance level earlier this month. It failed spectacularly. It then dropped almost 15% down to its support level at $194 in a long-wick rejection candle that now has technical analysts betting against ZEC and rooting for a pullback to $194.
Instead the zcash price to USD charts tell the story of a project that rallies on catalysts like cryptocurrency privacy nonprofit Zcomm's privacy awareness event on March 24 before quickly fading. Contrast that narrative with ZCash's actual value proposition: the absolute best privacy protections of any cryptocurrency project today. Mismatch problem.
Regulation Cast a Long Shadow Over ZEC
Privacy coins have faced greater regulatory scrutiny than their less-private counterparts since day one. A slew of Japanese exchanges delisted privacy coins in April 2018 following remarks from Japan's financial regulator. Korean exchanges followed suit two months later. More European countries joined in thereafter. ZCash has been along for the ride.
Every exchange delisting ZCash and its ilk chops off a point of access for potential users. Accessibility impacts adoption, which directly impacts ZEC price through simple mechanics most forget about when asking how to buy zcash.
Searching Google or Bing for how to buy zcash only yields results if the exchange a user chooses lists ZCash. Fail to find ZEC on an exchange and most don't go looking for ZEC at another one. Fear of missing out doesn't apply if users don't know ZCash is tradeable. It's a vicious cycle. Less exchange availability leads to less trading volume which leads to less liquidity. Less liquidity leads to worse spreads and more volatility which discourages institutions from joining the market.
The Morgan Stanley ETF proposal is a glimmer of institutions finding their way through the regulatory weeds. Institutions have found a way. It doesn't help the average person wanting to know how to buy zcash though, and the ETF application faces an uncertain road through the SEC as it is. So when the zec crypto price swung up and down on news of the filing alone on March 23, we knew ZEC was finally articulating a narrative institutions had been waiting to hear. Even then, that filing doesn't fix the access issue that has plagued crypto adoption for years.
A Messaging Fail
Critics will say ZCash damaged its own narrative by making privacy optional. Out of the gate, ZCash transactions can be shielded; no one can see the sender, receiver, or amount. Monero transactions work the exact same way. On ZCash, users have the option to send transparent transactions. Problematically, the shielded transactions are opt-in.
Regulators didn't love the privacy safeguards. Privacy advocates hated that users could send transactions where anyone could easily see those same details. ZEC got delisted from exchanges. Optional privacy meant fewer shielded transactions in aggregate, weakening the privacy of those who do use them defensively by eroding the anonymity set (the set of transactions your private transaction gets to hide within).
Where Poor UX Compounded the Accessibility Issue
Regulation (real and perceived) explains part of the exchange accessibility problem. UX explains part of the problem on the user acquisition front.
Generating that zero-knowledge proof used to take minutes. Minutes! Doing anything meaningful with your crypto should not require you to wait minutes for a transaction to complete. ZEC was simply not usable in a practical sense when compared to Bitcoin and most altcoins. That changed with Sapling, a ZCash upgrade launched in 2018 that accelerated ZCash shielded transaction times down to seconds. Competition from newer privacy projects have pushed those times down even further since. Improvements were made that ZCash users actually care about.
The branding failed ZCash where it counted. Someone googling what is zcash today will inevitably stumble across forum posts and outdated reviews ranking high on those Google search results talking about awful transaction times. The branding hasn't caught up to the current reality of using ZCash.
ZCash Mining vs Bitcoin Mining
ZCash uses the Equihash mining algorithm that resisted ASIC zcash mining for as long as it possibly could. ASIC miners eventually came to Equihash anyway. Despite ZCash's best efforts to remain a GPU-friendly mining algorithm, its transition to an ASIC-dominated network will forever alienate a subset of the community that helped build ZCash into what it is today.
Can't quantify that exodus. But ask yourself this: where are the Ethereum miner hashrate charts vs ZCash? A tremendous amount of grassroots early support was ZCash's founding ethos. Building that back would go a long way toward improving ZCash's positioning. As you'll notice below when we talk about messaging, the competition has mostly defined ZCash in the court of public opinion.
Messaging Mishaps Highlighted by Monero's Success
Monero did not invent a new or better technology. It open-sourced cryptographic research into what became Monero. In terms of cryptography, ZCash blew Monero out of the water. The privacy argument it could make was objectively true and verifiable by anyone with a rudimentary understanding of cryptography.
What Monero lacked in technological prowess it made up for with storytelling. Privacy comes on by default. No crypto corporation building a "trust us" foundation complete with a developer fund.
ZCash mined users during the peak years of cryptocurrency adoption. 2017-2020 was when most crypto users first opened their wallets. ZCash felt clunky in comparison to competitor projects. ZCash wallet support was mediocre at best and nonexistent on mobile. Many users opted into sending transactions just like Bitcoin, negating any perceived privacy advantage ZCash had over Bitcoin.
The optics weren't great for a privacy coin. Messaging-wise it checked the boxes for institutions: privacy was optional, transactions looked like Bitcoin, and it was managed by a not-for-profit corporation. But institutions don't trade privacy coins. At least they didn't until recently. The crowd that did care about privacy got sucked into the Monero narrative. ZCash got lost in no man's land. Too crypto for institutions. Too private for mainstream. Less visible in grassroots mining campaigns. Branded on the fly by crypto news dominated by volatility instead of technological innovation. ZCash's real-world blockchain innovations get implemented across the entire industry and reward the innovators... not ZCash.
Better messaging can absolutely change people's minds. That Zcomm event ZCash hosted on March 24 was put on to "equip the global community with the knowledge and tools they need to help promote and defend digital privacy worldwide." Care to guess what happened to ZCash price and ZEC news tone after the event? Community sentiment spiked. Price kicked off a sideways pattern for the first time in weeks based solely on an event.
ZCash Has Everything It Always Has
ZCash can and will win if the narrative changes. Every box on the proverbial checklist ZCash needs to tick is already checked.
ZCash was early to zero-knowledge cryptography. zk-SNARKs, ZCash's flavor of zero-knowledge proofs, are being implemented across pretty much the entire crypto industry right now. Ethereum's Layer 2 scaling solution of choice? Built on zk-SNARKs. Morgan Stanley is giving the SEC an ETF that holds ZCash and lists three of the largest crypto custodians as approved custodians. This is Wall Street saying ZCash should be able to list just fine as a regulated product.
Remember when we said trading volume doesn't reflect the narrative? $445 million in USD trading volume over the past 24 hours on zec to usd.
No one said converting ZCash's tech lead into real-world adoption would be easy. Regulation stole access points. The UX issues that plagued adoption early on left a legacy ZCash continues to suffer from online. Messaging failed to capture the privacy coin narrative to the degree Monero did. Against that backdrop ZEC rallies on a privacy advocacy event then retreats? Sounds like a compelling opportunity for those willing to bet on the narrative finally catching up to the technology.
