Behind the 7.25% decline in ZEC: governance turmoil, capital outflows, and mounting censorship pressure

According to the latest news, as of January 8th, ZEC (Zcash) is currently priced at $456.52, down 7.25% in the past 24 hours. This is not merely a technical adjustment but the result of multiple pressures including governance turmoil, on-chain fund outflows, and shielded pool unshielding.

Governance Turmoil Becomes a Psychological Blow

On January 8th, Electric Coin Company (ECC), the core development team of Zcash, announced that the entire team has resigned, citing “significant and ongoing deviations” from the mission by the governance body Bootstrap. The decision-making actions of the majority of Bootstrap’s board members (including Zaki Manian, Christina Garman, etc.) are seriously misaligned with Zcash’s original intent, leading to what ECC describes as a “de facto dismissal” of its members.

While ECC emphasizes that the Zcash protocol itself remains unaffected, the collective departure of the core development team undoubtedly impacts market sentiment. Investors are concerned about the ongoing maintenance and iterative development of the protocol, and this uncertainty has directly suppressed buying interest.

Large-Scale On-Chain Fund Outflows and Short Position Amplification

Deeper pressure comes from on-chain data. Over the past 7 days, ZEC funds have net flowed out by over $100 million, with the 30-day outflow reaching approximately $710 million, far exceeding other mainstream altcoins like UNI, FIL, and ADA.

Meanwhile, derivatives markets show continued strengthening of short positions. The largest short position is valued at $17.48 million, with “altcoin short army” continuing to increase short positions to $2.08 million recently. On-chain whale addresses are also showing risk-averse behavior, transferring 74,002 ZEC (worth about $35.75 million) to centralized exchanges, possibly for liquidity management or reducing holdings. The combined effect of fund outflows and short position increases directly drains ZEC’s upward momentum.

Large-Scale Unshielding from Shielded Pools Creates Selling Pressure

In early 2026, over 200,000 ZEC moved from shielded pools to transparent addresses, accounting for about 1.2% of circulating supply. This unshielding typically indicates assets entering tradable circulation, potentially creating new selling pressure.

The total ZEC in shielded pools has fallen from a high at the end of last year to about 4.86 million, with a clear slowdown in growth, indicating a cooling of bullish sentiment. The process of unshielding is relatively straightforward, and the market is closely watching subsequent developments.

Privacy Coins Underperform Overall

In early 2026, privacy coins generally declined against the trend. ZEC dropped from $530 to $490, a decline of about 7%, while the total market cap of TOTAL3 increased by approximately 7%. Monero (XMR) and Dash (DASH) also showed weak performance, with privacy coins being listed as the weakest segment by multiple data platforms.

This structural pressure stems from regulatory uncertainties facing privacy coins and a reassessment of investor demand for privacy assets, especially amid expectations of stricter regulation.

Derivatives with High Leverage Amplify Volatility

The largest long whale for ZEC (0x152) decisively increased holdings at a low point, adding 2,486 ZEC within 10 minutes, with a total increase of 9,871 ZEC over 20 hours. Currently, they hold a 10x leveraged long position valued at $12.35 million. Meanwhile, short positions are also actively positioned; a “firm short ZEC” whale re-entered after stop-loss, shorting 3,697 ZEC at 2x leverage.

This high-leverage structure in derivatives markets causes frequent liquidation events. Many longs are liquidated in the $485–$495 range, while shorts face pressure near $520. Repeated liquidations of high-leverage positions drain momentum from both sides, causing the price to oscillate repeatedly.

Key Focus Points Moving Forward

In the short term, ZEC should monitor:

• Development team movements: Progress of new company formation and whether the technical roadmap gains community approval
• Fund flows: Whether ZEC unshielded from shielded pools enters exchanges and triggers selling
• Derivative positions: Whether liquidation pressures from high-leverage positions are fully released
• Privacy coin policy expectations: How regulatory attitudes may impact the entire sector

Notably, institutional investors like Arthur Hayes remain optimistic about the privacy narrative. Grayscale’s Zcash Trust currently holds 393,000 ZEC, with management fees increasing to $440,000 weekly as the price rises, indicating sustained institutional demand for privacy coins.

Summary

The 7.25% decline of ZEC is driven by multiple overlapping factors: governance turmoil undermining market confidence, on-chain fund outflows and short position amplification creating a feedback loop, unshielding from shielded pools adding new selling pressure, the overall underperformance of privacy coins amid regulatory expectations, and high-leverage derivatives structures intensifying price volatility.

This is not merely a technical correction but a comprehensive reflection of fundamental, on-chain, and market sentiment factors. Investors should closely watch ECC’s new developments, changes in fund flows, and evolving regulatory expectations for privacy coins. In the short term, the $485–$495 range may serve as a key support zone, while resistance around $520 also warrants attention.