Recently, an interesting phenomenon has emerged in the cryptocurrency market. While mainstream coins are experiencing fluctuations and adjustments, the leading privacy coin ZEC has surged against the trend, skyrocketing over 800% compared to the altcoin market!
When the narrative of privacy once again becomes the market focus, and everyone is questioning how much longer ZEC can rise, today I will use on-chain data and market structure analysis to help you understand the reasons behind this surge.
1. The reality and illusion of ZEC's surge
On the surface, the narrative of ZEC is very attractive: as a pioneer in the privacy track, the halving mechanism that occurs every four years supports its value, and the recent increase in demand for privacy has driven a strong price breakout.
But when I delved into the data, I found several key facts:
First, there is a significant deviation between the price of ZEC and market perception. The token was once close to $1000, with a market cap of only $2 billion, and although the price has not returned to its peak, the market cap is now approaching $4 billion. What does this indicate?
The early price frenzy was driven by scarcity, while the current value is supported by a larger pool of funds.
Second, the real price increase does not occur in the spot market:
Spot trading volume: 1.37 million USD
Perpetual contract trading volume: far exceeds spot, dominating the market
Open contracts: reached an all-time high
2. Leverage game, who is in control?
When perpetual contract trading volume far exceeds spot, we must be cautious, as this often indicates that short-term leveraged funds are dominating the price.
Data shows that open contracts have a significant positive correlation with spot prices.
When open contract positions are at historical highs, it often signals that prices are also at relatively high levels.
Once the open interest starts to decline, the price is likely to follow with a correction.
What is more concerning is that the current funding rate is still negative, indicating that there are still more bears than bulls.
This creates potential short-squeeze opportunities, and market makers have the incentive to drive up prices in the spot market to harvest short positions.
This is akin to a mirror version of the GameStop incident: in the crypto market, it is the capital-advantaged market makers who harvest the retail short sellers.
In summary, the recent surge in ZEC is more driven by leveraged funds and short-term narratives than by fundamental improvements. With open contracts at historical highs, risks are accumulating.
