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Zcash Price Analysis - Hard fork slated for early December

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Zcash (ZEC) is a privacy-oriented fork of the Bitcoin protocol, currently ranked 32nd on the Brave New Coin market cap table. The ZEC spot price is down 96% from the all-time high set in January 2018. The market cap currently stands at US$290 million, with a reported 24% of the total market cap, or US$72 million, traded in the past 24 hours.

A quick comparison between coins with privacy capabilities shows that ZEC is leading the total daily transaction volume by a wide margin. Other coins with privacy features include Monero (XMR), Zcash (ZEC), Grin (GRIN), and PIVX (PIVX). However, both XMR and GRIN obscure blockchain transaction values and addresses used.

The ZEC protocol is based on Zerocoin, which was developed in 2013 and later turned into Zerocash, with a difficulty adjustment algorithm adopted from DigiShield v3. The ZEC cryptocurrency went live in 2016 and trading began in late October 2016.

The ZEC blockchain currently targets a 2.5 minute block time, with a block size limit of 2MB. The total supply will grow to a final number of 21 million, with a current annual inflation rate of 33% (brown, chart below). The ZEC inflation rate is among the highest of any cryptocurrency. In contrast, Bitcoin (BTC), DASH (DASH), XMR, GRIN, and PIVX annual inflation rates are 3.61%, 3.32%, 6.80%, 123%, and 4.33%, respectively.

Source: CoinMetrics

Opposed to the ICO model, ZEC uses a "Founders' Reward" for funding development. The Founders’ Reward, which accounts for 10% of all minted ZEC, is distributed as follows; 5.72% for founders, employees, and advisors, 1.65% to initial investors, 1.44% to the Zcash Foundation, and 1.19% to the Electric Coin Company, formerly the Zcash Company. The ongoing incentive was designed to encourage a dedicated team to provide continual development for the project over several years. According to a Q3 transparency report, ECC operated at a deficit of 30% in Q1.

The Electric Coin Company (ECC) is led by founder and CEO Zooko Wilcox. The Company constitutes what is described as “the creators and stewards of the Zcash currency.” Notable advisors included Bitcoin developer Gavin Andresen, Ethereum founder Vitalik Buterin, and Arthur Breitman from Tezos. Roger Ver was also one of the Zcash Company's initial investors.

The Zcash Foundation, created in February 2017, is an independently operated 501(c)3 “dedicated to building Internet payment and privacy infrastructure for the public good, primarily serving the users of the Zcash protocol and blockchain.” Current foundation members include Andrew Miller, Peter Van Valkenburgh, Amber Baldet, Matthew Green, and Ian Miers. Green and Miers were both part of the original ZEC founding team.

Recently, the ECC and Zcash foundation had been at odds regarding the ZEC trademark. The ECC announced it had donated the ZEC trademark to the Zcash Foundation on November 6th, with no strings attached. Under this new agreement, both parties must agree on any network upgrade that is intended to create a new consensus protocol for ZEC. If the parties disagree, and the disagreement cannot be resolved before activation of the network upgrade, the chain splits and neither implementation, neither the new one nor the existing one, can be called Zcash. This trademark resolution occurs in the setting of Wilcox asking for further developer funding through a renewed Founders’ Reward, currently set to expire in October 2020.

The Foundation has implemented several improvements to the ZEC ecosystem over the past few months. The Foundation announced Zepio in May, which is a privacy-focused wallet that sends shielded transactions by default. In June, the Foundation announced a partnership with Parity Technologies to release a new software client, Zebra. Written in Rust, the open-source client is an alternative to zcashd and brings redundancy should zcashd fail. The client is also designed to detect problems related to the consensus mechanism and implementation-specific bugs. Ethereum (ETH) also has two clients, Parity and Geth, for similar reasons.

The ZEC protocol leverages zk-SNARKs, or Zero-Knowledge Succinct Non-Interactive Argument of Knowledge, which is based on zero-knowledge proofs. The protocol uses zk-SNARKs for optional privacy elements. ZEC addresses beginning with a "t" are transparent, and addresses that start with a "z" include privacy enhancements and are referred to these as "shielded addresses."

The ZEC protocol saw two upgrades in 2018, “Overwinter” on June 26th, and “Sapling” on October 29th. Both upgrades were enacted through hard forks, and both enhanced transaction efficiency and scalability for shielded addresses.

The Sapling upgrade has reduced the zk-SNARK proving time from 37 seconds to 2.3 seconds, and introduced zc (legacy shielded) and zs (Sapling shielded) addresses. The shielded transaction count continues to represent a small fraction of total transactions, currently around 13% (blue line, chart below).

The shielded pool would be much larger if exchanges did not disable the optional privacy functionality when sending ZEC. In December 2017, programmer jeffq discovered that shielded transactions on ZEC can be linked to non-shielded transactions unless both the sender and receiver were part of the “shielded pool” of anonymous transactions.


The current total number of transactions per day on the network (line, chart below) stands at just under 3,000, which is down from a January 2018 high of 11,500 per day, but up from a February 2019 low of 2,000. Transactions per day are, on average, down from levels seen in 2018 and mid-2019. The average transaction value (fill, chart below) is currently US$6,000, up from an April 2018 low of US$62, and recently reached a new all-time high of nearly US$15,000.

Source: CoinMetrics

The average daily block size (line, chart below) sat at or near all-time lows for most of 2019, barring a brief spike in block size recently. The average transaction fee (fill, chart below) has declined since June 2018, and is currently US$0.009. The Sapling upgrade made shielded transfers 100 times smaller in size than before the upgrade, which in turn now makes these transactions cheaper to send.

Source: CoinMetrics

The 30-day Kalichkin network value to estimated on-chain daily transactions (NVT) ratio (line, chart below) fell dramatically after July 2019, but recently bounced off the all-time low. A clear downtrend in NVT suggests a coin is undervalued based on its economic activity and utility, which should be seen as a bullish price indicator, whereas an uptrend in NVT suggests the opposite. The 15% of transactions that are shielded are not included in this calculation, meaning the true NVT is likely slightly lower than the metric suggests.

Monthly active addresses (MAA) have declined substantially from the January 2018 high of 96,000 to the current 14,000 (fill, chart below). Active addresses are important to consider when determining the fundamental value of the network based on Metcalfe's law. ZEC has fewer MAAs than BTC, ETH, DASH, Litecoin (LTC), EOS (EOS), DOGE (DOGE), Bitcoin Cash (BCH), and Ethereum Classic (ETC).

Source: CoinMetrics

The market cap divided by the realized cap (MVRV) is another crypto-native fundamental metric used to asses overbought or oversold conditions. Realized cap approximates the value paid for all coins in existence by summing the market value of coins at the time they last moved on the blockchain.

Historically, periods of an MVRV less than 0.4 have represented oversold conditions, whereas periods of an MVRV greater than 1.0 have represented overbought conditions. Of the MVRV levels above four since January 2013, all three have coincided with record highs in price. Currently, MVRV is 0.37 and flat, suggesting the possibility of oversold conditions.

Source: CoinMetrics

The ZEC network currently has 327 unique and active nodes, which is down from 600 in December 2018. Most of the nodes reside in Germany, the United States, and France. ZEC uses the Equihash Proof of Work (PoW) algorithm, which was originally thought to be ASIC-resistant. However, Bitmain developed ASIC miners for the Equihash algorithm, which first went live on the network in May 2018, and shipped broadly in June 2018. All available Equihash ASICs are currently profitable at US$0.06 per KWh (below).

Source: asicminervalue

In response to the rise in ASIC use on the chain, the ZEC foundation announced an initiative towards researching ASIC resistance on the chain and the ECC concluded that the “ultimate objective” is the broad inclusion of both hobbyists and professionals. The ZEC community voted and decided to discourage ASIC resistance as a priority and instead focus on currently unused PoW algorithms. Any future changes will need approval through the ZEC Improvement Proposal (ZIP) process.

Hash rate and difficulty have continued to increase rapidly since April 2019, setting a new all-time high in mid-October. The use of ASICs to mine a cryptocurrency can mean that the network becomes much less decentralized over time as the hardware continually squeezes out miners with less hashing power. While constant PoW adjustments decrease ASIC use substantially, the process may also lead to a different type of centralization through the need for constant node upgrades.

Source: BitInfoCharts

The ZEC project on GitHub has 16 repositories with 456 commits on the main repo in the past year (top chart, shown below). The Zcash Improvement Proposals repo (bottom chart, shown below) has also been fairly active over the past year. Both repos mainly consist of commits by developers Daira Hopwood and str4d.

Most coins use the developer community of GitHub where files are saved in folders called "repositories," or "repos," and changes to these files are recorded with "commits," which save a record of what changes were made, when, and by who. Although commits represent quantity and not necessarily quality, a higher number of commits can signify higher dev activity and interest.

The upcoming “Blossom” upgrade is slated for release early in December and will include; shortening the target block times from 150 seconds to 75 seconds, a mempool size limit to prevent denial of service attacks, and discontinued backward compatibility with Sprout proofs to decrease the attack surface of the ZEC Codebase. The ECC also has some nascent plans to build a new chain with sharding and privacy by default. This process would also involve a chain migration, which is similar to the pending migration from ETH 1.0 to ETH 2.0.

Source: Github - zcash

Source: Github - zips

In the markets, ZEC exchange-traded volume over the past 24 hours has predominantly been led by the Tether (USDT) and Bitcoin (BTC) pairs. ZEC has gained several exchange listings over the past two years, being added to; the Gemini exchange in May 2018, Bittrex in September 2018, Coinbase in December 2018, and eToro earlier this year. Binance also added several trading pairs in March. Binance.US listed a ZEC/USD pair in late October

In June 2018, the U.S. Secret Service recommended the regulation of all privacy coins, including ZEC, Monero, and Dash. Japan's Financial Services Agency has already pressured exchanges to drop the same assets, citing criminal activity. Coincheck, one of the more popular Japanese exchanges, delisted all three coins in May 2018. Earlier this year, UK-based announced it was delisting ZEC and DASH due to banking pressures. Coinbase UK also delisted ZEC earlier this year for unknown reasons.

Worldwide Google Trends data for the term "zcash" has remained flat since July 2018, with a slight uptick recently. A slow rise in searches for "zcash" preceded the bull run in Q4 2017, likely signaling a large swath of new market participants at that time.

Google Trends data has been found to have some correlation with crypto prices. A 2015 study found a strong correlation between the Google Trends data and BTC price, while a 2017 study concluded that when the U.S. Google "bitcoin" searches increased dramatically, BTC price dropped.

Technical Analysis

ZEC has maintained a strong correlation with BTC since inception, which recently neared 95%. As ZEC attempts to find a bottom, any new trend can be evaluated using exponential moving averages, volume, the Ichimoku Cloud, and pitchforks. Further background information on the technical indicators discussed below can be found here.

On the daily chart for the ZEC/USD market, the 50-day Exponential Moving Average (EMA) and 200-day EMA crossed bearishly on July 29th, with the spot price being held below the 50-day EMA ever since this “Death Cross.” Both the 50-day EMA, at US$38, and the 200-day EMA, at US$56, should now act as resistance. Further, the Volume Profile of the Visible Range (horizontal bars, chart below) suggests a large resistance node from US$57 to US$67.

Bitfinex open interest is 91% long (top panel, chart below), with longs declining since late May. A significant price movement downwards will result in an exaggerated move as the long positions will begin to unwind. There is also a multi-month bullish Relative Strength Index (RSI) divergence suggestive of waning bearish momentum.

Turning to the Ichimoku Cloud, four metrics are used to indicate if a trend exists; the current price in relation to the Cloud, the color of the Cloud (red for bearish, green for bullish), the Tenkan (T) and Kijun (K) cross, and the Lagging Span. The best entry always occurs when most of the signals flip from bearish to bullish, or vice versa.

Cloud metrics on the daily time frame, with doubled settings (20/60/120/30) for more accurate signals, are currently bearish; price is below Cloud, the Cloud is bearish, the TK cross is bearish, and the Lagging Span is below Cloud and in price. A traditional long entry signal will not trigger until the spot is once again above the Cloud.

On the ZEC/BTC pair, the spot price has remained below the 200-day EMA since the asset’s launch, as well as being firmly bound by a bearish pitchfork (PF) since 2018. Price has also been significantly constrained by the 50-day EMA for the past few months. The median line of the PF (yellow) and the 200EMA will act as both a mean reversion point and strong resistance.

A break of the 200-day EMA, currently at 0.00712 BTC, as well as a bullish 50/200EMA cross would be a strong signal for bullish continuation. Otherwise, the asset will likely remain below the 200EMA for the foreseeable future. There is also currently a bullish divergence, suggesting waning bearish momentum in the near term.


The Electric Coin Company and the Zcash Foundation have come to an amicable agreement regarding the Zcash trademark. Clearing this dispute has paved the way for the Blossom hard fork scheduled for early December, which will bring shorter block times and denial of service mitigation. Future protocol upgrades for ZEC include a radical change to the privacy functionality and scaling mechanism, as well as reintroducing the Founders’ Reward, which is set to expire in 2020.

On-chain usage statistics suggest that despite record highs in hash rate, transactions per day and daily active addresses remain muted. Even with the integration of Sapling, shielded addresses are not being utilized by a majority of transactions. The inflation rate of ZEC will likely continue to quell any attempt at a long term bull trend, especially without any mainstream adoption. In a vacuum, ZEC’s NVT and MVRV both paint excellent buy opportunities.

Technicals for both the ZEC/USD and ZEC/BTC markets show waning bearish momentum despite an active and prolonged bearish trend. Both a bullish RSI divergence and the distance of price from the 200-day EMA suggest the potential for a bullish reversal. In the future, significant price action above the 200-day EMA would suggest a healthy long term outlook on either pair.



Josh Olszewicz, Khareem Sudlow