Zcash hits multi-year high: What is driving the rally?

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Zcash hits multi-year high

What accelerated the rally

On August 25, Grayscale launched the first U.S. exchange-traded fund offering direct exposure to Zcash. The ETF began trading on NYSE Arca under the ticker ZCSH after the conversion of the Grayscale Zcash Trust. The fund charges a 2.5% annual fee, while its assets under management exceeded $313.5 million on the eve of the launch.

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The market began pricing in the launch even before trading started. Following another Grayscale filing on August 21, ZEC gained more than 22% in a day and briefly reached $855, its highest level since 2018. The cryptocurrency is now trading at around $780, compared with roughly $500 a month ago. That means ZEC has gained more than 50% in a month.

Additional interest came from reports that a subsidiary of Digital Currency Group, Grayscale’s parent company, is considering buying around 200,000 ZEC through the fund. At the time the plans were disclosed, such a position was worth about $164 million. The deal is not binding, meaning the company could buy fewer coins or abandon the purchase altogether.

Activity in the derivatives market also increased sharply during the rally. Daily ZEC futures trading volume is currently hovering around $5 billion, while spot-market volume is about $440 million.

Zcash’s largest miner

Even before the ETF launch, Cypherpunk Technologies made a major bet on Zcash. On August 18, the company announced the purchase of $33.33 million worth of mining equipment from Winklevoss Capital to launch the world’s largest Zcash mining fleet. The mining facilities are already operating across the U.S. and account for around 18% of the network’s total hashrate.

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The company is also increasing its holdings of the cryptocurrency itself. Cypherpunk currently holds 323,394 ZEC, or around 1.9% of the coins in circulation, and plans to eventually increase that share to 5%. The company says that under current market conditions, Zcash mining may offer higher returns than Bitcoin mining or using computing capacity for AI workloads.

Zcash also received an additional boost from renewed demand for privacy-focused cryptocurrencies. Grayscale believes that the development of AI and financial monitoring tools is making privacy increasingly important, and that Zcash could benefit from this trend through its shielded transaction technology.

A crisis Zcash managed to survive

The current rally was preceded by one of the most serious crises Zcash has faced in recent years. In late May, researcher Taylor Hornby discovered a vulnerability in the Orchard shielded pool. A flaw in its zero-knowledge proof system could theoretically have allowed counterfeit ZEC to be created without being immediately detected. Developers found no evidence that the vulnerability had been exploited.

The market reacted sharply after the issue was disclosed. In June, ZEC fell by around 60%, from $630 to $250. Developers first temporarily disabled Orchard transactions and then released an emergency network upgrade that fixed the flaw.

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The next step came on July 28, when the Ironwood upgrade was activated. It introduced a new shielded pool, while Orchard was effectively moved into withdrawal-only mode. Ironwood’s code underwent formal verification, while the protocol also added a mechanism allowing the circulating ZEC supply to be independently audited and the 21 million coin supply cap to be verified.

The key question after the rally

As we can see, the project managed to recover after the discovery of the critical vulnerability and the sharp drop in ZEC. Against this backdrop, the ETF launch and Cypherpunk’s major investments became additional drivers of growth.

Much will now depend on whether Zcash can retain the attention of large investors. If the ETF starts attracting significant new capital and companies continue accumulating ZEC and investing in mining, the cryptocurrency could have further room to rise. However, after gaining more than threefold from its June low, the risk of a sharp correction has also increased significantly.

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