More than 1% of Zcash’s supply — over 200,000 ZEC — was unshielded in early 2026, injecting a sizable amount of previously private coins into the transparent market. The move immediately heightened sell-off concerns as market participants and analysts warned of added pressure on exchange order books and on-chain liquidity.
The unshielding translated into tangible selling risk. ZEC’s price fell by roughly 7%, sliding from about $530 to $490 while the broader altcoin benchmark (TOTAL3) rose about 7%, underlining a sector-specific weakness.
Derivatives flows amplified the effect: reported outflows and growing short interest increased downside exposure. Technical indicators cited by observers included an overbought Relative Strength Index, whale activity testing the $500 support band, and a bearish rising-wedge formation that raised the possibility of deeper corrections toward lower support ranges mentioned by analysts.
At the same time, blockchain analytics work that labeled a majority of Zcash activity intensified questions about the protocol’s privacy assurances and near-term price resilience.
Privacy erosion, supply composition, and market structure
Analytics work identified and labeled more than 53% of Zcash on-chain activity, a finding that market commentators said “fundamentally undermines Zcash’s core privacy narrative.” That visibility converted a portion of transactions that users had treated as privacy-preserving into traceable flows, changing the effective liquid supply dynamics.
Approximately 30% of ZEC supply remained locked in shielded pools, a structural constraint on liquid supply that has historically supported price. While the newly transparent tranche — previously considered illiquid — represented immediate selling optionality and altered market depth.
Investors and product teams must weigh two opposing forces. On one side, the unshielding and improved traceability raised short-term volatility and forced reassessments of liquidity risk. On the other, institutional interest and renewed demand for regulated access to privacy-preserving technology remained cited as potential support.
Looking ahead, market participants were expected to watch institutional developments closely: potential approvals of regulated Zcash products and the approaching halving event will influence capital flows and liquidity.
