ZEC Crisis Reversal: From a 26% Plunge to a 6.57% Rebound, Rational Return in the Privacy Coin Sector

Zcash (ZEC) has experienced a rollercoaster market test in just 4 days. From a 26.6% plunge triggered by the collective resignation of the core development team Electric Coin Company (ECC) on January 8, to a rebound back to $402.74, up 6.57% in 24 hours, this process reflects not a simple fluctuation in project value, but the complete evolution of market sentiment from panic to rational reassessment.

From Panic to Rebound: What Happened

The turmoil on January 8 was indeed intense. ECC team members resigned en masse due to disagreements with the management organization Bootstrap over the project’s direction, directly causing a flash crash of ZEC—dropping from a high of $557 to nearly $400 within 7 hours, with a market cap evaporating $1.6 billion. Retail investors’ panic was concentrated, with some selling off overnight.

But the story did not unfold according to the “doomsday script.”

Turning Point in Rational Awareness

After announcing their departure, the ECC team quickly sent a key signal: the Zcash protocol itself is unaffected by governance changes, and the original team is establishing a new company to continue advancing privacy technology. This statement broke the market’s worst-case expectations.

Crucially, investors began to distinguish two different concepts: governance crisis does not equal technical crisis. Zcash’s core value comes from its zero-knowledge proof technology and privacy mechanisms—these are protocol-level features that do not disappear due to personnel changes. This shift in understanding is the foundation of the rebound.

On-Chain Data Mapping of Bull-Bear Battles

During the rebound, market participants’ behavior became more complex. According to on-chain data, large holders transferred 74,002 ZEC (worth about $35.75 million) to exchanges on January 9, indicating liquidity preparation. Meanwhile, the largest bullish whale decisively increased its holdings near $449—adding 2,486 ZEC within 10 minutes, accumulating a total increase of 9,871 ZEC over 20 hours, currently maintaining a $12.35 million long position with 10x leverage.

This is not a one-sided bullish move but a fierce battle with repeated liquidations in the $485–$520 range. The bearish forces are also increasing, but the continuous accumulation by bulls indicates a market consensus on medium-term value is forming.

ZEC’s Positioning Amid Sector Pattern Changes

This incident exposed a phenomenon in the privacy coin sector: capital reallocation. Monero (XMR), due to its higher decentralization, more mature privacy mechanisms, and absence of governance crises, has regained its position as the most valuable privacy cryptocurrency. On-chain data shows Zcash’s Chaikin fund flow indicator turning negative, reflecting ongoing net outflows, while Monero’s similar indicator rises rapidly.

But this does not mean demand for privacy coins is waning. On the contrary, since September 2025, even after this 26.6% correction, ZEC’s cumulative gains have reached 808%. This indicates the overall attractiveness of privacy assets remains, but investors are becoming more cautious in their choices.

Institutional Attitudes Remain Stable

It’s worth noting that institutional positioning has not significantly wavered. Arthur Hayes’s Maelstrom established a large Zcash position in Q3 2025, making ZEC the second-largest liquid asset in its portfolio after Bitcoin. Dragonfly partner Haseeb compares Zcash to BitTorrent, believing its “innocent origins” and “cypherpunk spirit” have helped it survive industry turbulence. Grayscale continues to reinforce Zcash’s position in institutional investment through recent rebalancing and spot ETF strategies.

These ongoing institutional holdings provide some medium-term support for ZEC.

Key Points to Watch Moving Forward

Whether this rebound can sustain depends on several factors:

• Progress of New Company: The development of products like the cashZ wallet by the original ECC team, and whether they proceed as planned, will directly influence market expectations for project activity.
• Development of Privacy Narrative: Industry views see privacy as a key differentiator in blockchain competition by 2026. This narrative framework provides medium-term support for ZEC.
• Balance of Bull-Bear Forces: The current leverage positions and battle dynamics determine short-term volatility.
• Overall Direction of Privacy Coins Sector: Whether the competition pattern between XMR and ZEC remains stable.

Summary

ZEC’s rebound from crisis fundamentally reflects the market’s reassessment of the project’s fundamentals. Governance crises are real but do not equate to the collapse of project value. The protocol’s maturity, ongoing institutional involvement, and genuine privacy demand all support the logic of the rebound.

The current price of $402.74 is neither a confirmation of a bottom nor a signal of a top but part of the market’s re-pricing process. For ZEC’s future performance, the focus is less on governance itself and more on whether the new development team can sustain technological innovation and whether the privacy narrative can gain broader recognition in 2026.