Zcash governance infighting escalates, ZEC plummets 7%, but institutions are still bottoming out in the privacy sector

Zcash core development team Electric Coin Company (ECC) collectively resigned due to governance disagreements, directly triggering market sentiment. The ZEC price plummeted 7.25% within 24 hours, falling to $456.52, hitting a recent low. However, it is worth noting that this governance turmoil has not stopped institutional deployment; Arthur Hayes, Grayscale, and others are still increasing their privacy asset holdings, reflecting a divided market perception of ZEC’s long-term value.

Details of the Governance Crisis

Why did the development team resign collectively?

On January 8, the CEO of Zcash developer Electric Coin Company (ECC), Josh Swihart, publicly stated that all ECC employees resigned collectively the day before. The direct cause was serious governance disagreements with the nonprofit organization Bootstrap, which manages ECC.

Swihart pointed out that the decisions of the majority of Bootstrap’s board members (including Zaki Manian, Christina Garman, Alan Fairless, Michelle Lai, etc.) have “significantly deviated from Zcash’s mission.” The more immediate trigger was that these directors, through ZCAM presumed termination actions, unilaterally amended the employment terms of the ECC team, making it “impossible for the team to perform their duties effectively and with integrity.”

Swihart emphasized that this was not a voluntary resignation but more akin to a “constructive dismissal.” However, he also stated that the original ECC team is in the process of establishing a new company, with members and technical direction remaining consistent, and the core goal still being to build an “unstoppable privacy currency.” Crucially, he clarified that the Zcash protocol itself remains unaffected, which is an important technical safeguard.

Market Reaction and Sentiment Shift

The governance turmoil directly impacted market sentiment. ZEC dropped 7.25% in 24 hours, with a 10.82% decline over 7 days, indicating investor concerns over governance uncertainty.

The core concern for investors is that chaos in the development authority structure could slow down Zcash’s ecosystem development pace, exerting ongoing pressure on ZEC’s price.

Continued Institutional Support

Big players are still increasing their privacy sector holdings

Despite the serious governance turmoil, institutional deployment has not stalled. This precisely reflects market confidence in the long-term value of privacy assets.

Arthur Hayes publicly stated on January 6 that privacy will become the dominant narrative in the crypto market by 2026. More importantly, he revealed that his family office Maelstrom began quietly accumulating Zcash in Q3 2025. Currently, ZEC is Maelstrom’s second-largest liquid asset, second only to Bitcoin. Hayes’s reasoning is: the US will continue to “print money” to stimulate the economy, and aggressive credit expansion will bring ample dollar liquidity, which not only boosts Bitcoin but also benefits privacy assets.

Multiple Dimensions of Institutional Deployment

Institutional increases are not only driven by Hayes:

• Grayscale submitted documents in H2 2025 to convert the Zcash Trust into a spot ETF, indicating that privacy assets are gaining more compliant channels.
• Reliance Global Group announced a unified digital asset reserve adjusted to ZEC.
• Cypherpunk Technologies recently raised approximately $29 million worth of Zcash to advance a ZEC-based reserve strategy.

These deployments show that, despite governance issues, institutional strategic recognition of the privacy sector remains high.

Long-term Outlook for Privacy Sector

The technological value still exists

Zcash’s transaction mechanism based on zero-knowledge proofs (zk-proof) allows users to complete transfers without revealing identity information. This technical feature remains valuable amid increasing on-chain transparency and stricter regulation.

Early project member Eli Ben-Sasson recalled that during discussions with Michael Saylor, the latter did not consider privacy as a core requirement of Bitcoin. But the reality is that as on-chain transparency increases, privacy needs are actually rising.

Market perception of privacy is changing

Before the governance turmoil, ZEC experienced a significant rally, indicating that the market’s phased interest in privacy assets still exists. This is not accidental but reflects a larger trend:

• On-chain data is becoming more transparent, and privacy needs are intensifying.
• Regulatory environments are pushing for compliant privacy solutions.
• Institutional investors are re-evaluating the allocation value of privacy assets.

Short-term Pressure and Long-term Game

Personal opinion

In the short term, governance turmoil clearly puts pressure on ZEC. The resignation of the development team may slow project progress, likely continuing to suppress prices over the next 3-6 months. But in the long run, this turmoil could serve as a “cleansing” — a new team with greater independence might be more conducive to healthy project development.

Key points to watch moving forward

• The formal establishment and operational progress of the new development company
• Governance adjustments by Bootstrap (whether there will be a board reorganization)
• Progress of Grayscale’s spot ETF approval
• Changes in privacy policy environment (especially US regulatory developments)
• Whether other institutions continue increasing privacy asset allocations

Summary

Zcash is at a critical stage of balancing “governance trust” and “technological value.” In the short term, the governance turmoil will likely continue to suppress ZEC’s price, but this is not the end. Continued institutional deployment, the long-term prospects of the privacy sector, and the technical integrity of the Zcash protocol all support this project.

The key is: if the new development team can smoothly take over and advance the project, and if the privacy policy environment does not undergo extreme changes, this governance crisis may be just a temporary episode rather than a turning point. However, investors should be prepared for short-term volatility remains unavoidable.