Zcash price has staged a strong comeback this month, leading to a substantial short squeeze. The ZEC token has jumped from a low of $34 in August to $280, a 710% increase surge that has pushed its market capitalization to almost $4 billion.
FOMO and Grayscale are driving the Zcash rally
Zcash is a top cryptocurrency in the privacy space, where it competes with the likes of Dash and Monero.
It does that by having two types of transactions: transparent and shielded. Transparent transactions are similar to Bitcoin in that they are available on a public ledger, while the shielded ones use zero-knowledge (zk) to ensure that transactions are private.
In shielded transactions, information on the amount of money being sent and the addresses of the senders and recipients are keep hidden from the public view.
The Zcash price has been in a strong uptrend since last year when Grayscale announced the launch of a fund tracking the coin. This fund will allow American investors to invest in it, and possibly opens the door for a spot ZEC ETF filing.
The Zcash price has also jumped as that announcement triggered Fear of Missing Out (FOMO) among investors, which explains why it has continued rising. Data shows that the daily volume jumped by 90% to $1.4 billion, while the futures open interest soared to a record high of over $350 million.
ZEC price has jumped because of the ongoing liquidations of short traders. Daily liquidations soared to $6.7 million on Friday from $4.69 million on the previous day. Altogether, shorts liquidations worth over 50 million has happened this week.
The Zcash price rally has been notable as it happened in the same week that the crypto market crash occurred. Data shows that the market capitalization of all coins has plunged by over $200 billion this week.
ZEC price technical analysis
There are technical reasons why the ZEC price soared this week. The daily timeframe chart shows that the coin’s price remained in a tight range between January and September. In this period, the token remained inside the resistance at $54 and the support at $28.
As such, there are signs that the token was in the accumulation phase of the Wyckoff Theory, which is characterized by low volume and volatility. The chart shows that the Average True Range (ATR) continued to drop as the volatility plunged.
The accumulation phase is then followed by the markup, which is characterized by high demand and a parabolic move. It is also characterized by the Fear of Missing Out (FOMO) among investors.
Therefore, there is a risk that the ZEC price will crash as soon as it enter the markdown and the distribution phases. Besides, data shows that the coin has become highly overbought, with the Relative Strength Index (RSI) jumping to 80 and the Stochastic moving to nearly 100.
A crash will likely bring the ZEC price to the important support level at $150, which is about 40% below the current level. It could also plunge below $100 as profit-taking intensifies.
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