Zcash: Governance Crisis Triggers Price Plunge, but Institutional Support Remains Strong

Zcash’s core development team, Electric Coin Company (ECC), collectively resigned over governance disputes, directly triggering market panic. ZEC price plummeted 7.25% within 24 hours, falling to $456.52 and hitting a recent low. However, notably, this governance turmoil has not deterred institutional positioning, with Arthur Hayes, Grayscale, and others continuing to increase exposure to privacy assets, reflecting divergent market views on ZEC’s long-term value.

Details of the Governance Crisis

Why Did the Development Team Resign Collectively

Electric Coin Company (ECC), the Zcash development entity, CEO Josh Swihart publicly stated on January 8 that all ECC employees resigned the previous day. The direct cause of resignation was serious governance disputes with Bootstrap, the non-profit organization managing ECC.

Swihart pointed out that the majority of Bootstrap’s board members (including Zaki Manian, Christina Garman, Alan Fairless, and Michelle Lai) had made decisions that had “clearly deviated from Zcash’s mission.” The more direct trigger was that these board members unilaterally modified ECC team employment terms through ZCAM presumed dismissal, making it “impossible for the team to fulfill duties effectively and with integrity.”

Swihart emphasized this was not a voluntary resignation but rather closer to “constructive dismissal.” However, he also stated that the original ECC team is establishing a new company with consistent membership and technical direction, with the core objective remaining to build “unstoppable privacy currency.” Crucially, he explicitly stated that the Zcash protocol itself remains unaffected, providing important technical safeguards.

Market Reaction and Sentiment Shift

The governance turmoil directly impacted market sentiment. ZEC fell 7.25% within 24 hours, with a 7-day decline of 10.82%, reflecting investor concerns about governance uncertainty.

Investors’ core concern is that chaos in development power structures may slow Zcash’s ecosystem advancement pace, creating sustained downward pressure on ZEC price.

Institutional Support Continues

Major Players Still Increasing Privacy Track Exposure

Despite the severe governance turmoil, institutional positioning has not halted. This precisely reflects market confidence in privacy assets’ long-term value.

Arthur Hayes publicly stated on January 6 that privacy will become the dominant narrative in the crypto market in 2026. More importantly, he revealed that his family office Maelstrom quietly began accumulating Zcash starting in Q3 2025, with ZEC now being Maelstrom’s second-largest liquid asset, second only to Bitcoin. Hayes’s logic is: the U.S. will continue “monetary stimulus” to boost the economy, aggressive credit expansion will provide abundant dollar liquidity, which not only supports Bitcoin but will also benefit privacy assets.

Multiple Dimensions of Institutional Positioning

Institutional increase is not just Hayes’s voice:

• Grayscale submitted relevant documents in H2 2025 to convert its Zcash Trust into a spot ETF, meaning privacy assets are gaining more compliance channels
• Reliance Global Group announced unified adjustment of digital asset reserves to ZEC
• Cypherpunk Technologies recently raised approximately $29 million equivalent in Zcash to advance a ZEC-based reserve strategy

These positioning moves indicate that despite governance turmoil, institutional strategic recognition of the privacy track remains high.

Long-term Prospects of the Privacy Track

Technical Value Still Exists

Zcash’s transaction mechanism based on zero-knowledge proof (zk-proof) allows users to complete transfers without exposing identity information. This technical characteristic still has clear value given widespread on-chain tracking and increasingly strict regulation.

Early project member Eli Ben-Sasson recalled in discussions with Michael Saylor that the latter did not believe privacy was Bitcoin’s core requirement. But reality shows that as on-chain transparency increases, privacy demand is actually rising.

Market Perception of Privacy Is Changing

Before the governance turmoil, ZEC experienced a notable rally, indicating the market’s ongoing phase interest in privacy assets. This is not coincidental but reflects a larger trend:

• On-chain data becomes increasingly transparent, privacy demand grows stronger
• Regulatory environment forces emergence of compliant privacy solutions
• Institutional investors begin reassessing allocation value of privacy assets

Short-term Pressure and Long-term Game

Personal View

In the short term, governance turmoil’s pressure on ZEC is clear. Development team departure may slow project advancement pace, potentially continuing to suppress price over 3-6 months. But long-term, this turmoil may instead be a “cleansing”—the new team’s independence may be stronger, actually benefiting project healthy development.

Key Points for Monitoring

• Formal establishment and operational progress of the new development company
• Bootstrap’s governance adjustments (whether board restructuring occurs)
• Grayscale spot ETF approval progress
• Changes in privacy policy environment (especially U.S. regulatory direction)
• Whether other institutions continue increasing privacy asset allocation

Summary

Zcash is at a critical stage of “governance trust” versus “technical value” game. Short-term, governance turmoil will indeed continue suppressing ZEC price, but this is not the endgame. Continued institutional positioning, long-term privacy track prospects, and Zcash protocol’s own technical integrity all provide support for this project.

The key is: if the new development team can successfully take over and advance the project, while privacy policy environment avoids extreme changes, this governance crisis may only be an interlude, not a turning point. But investors should prepare mentally—short-term volatility remains difficult to avoid.