Zcash Crosses $1,000 Mark, Mass Short-Seller Liquidation

A round number for carnage. Zcash passed the symbolic $1,000 mark this Friday, climbing around 20% in a single day. The token has not only reached a milestone. He also liquidated tens of millions of dollars in bets against him in the process, in a rally that has now lasted for weeks and which stubbornly refuses to run out of steam. Here's what happened, and why it continues.

1,000 dollars, a milestone paid in cash by short sellers

ZEC climbed to around $1,023 on Friday, up from just $828 the day before, according to CoinDesk data. The trading volume exceeded $1.2 billion over 24 hours, and the capitalization of the token approached $17 billion.

The surge forced the closing of about $36.6 million in leveraged positions, of which $34.5 million came from short sellers, traders who were betting the price would fall. When the price rises faster than they can cash it, their position is forcibly liquidated, forcing them to repurchase the token to close out their positions. And buying back urgently pushes the price even higher.

Over one month, ZEC gains around 94%. Over one year, more than 2,300%. Enough to propel Zcash to tenth place among cryptocurrencies by capitalization, ahead of Dogecoin.

Grayscale, DCG and the hard money thesis

Two institutional catalysts explain a large part of the movement. At the end of August, Grayscale converted its Zcash Trust fund, previously reserved for accredited investors, into a real spot ETF listed on the NYSE Arca under the ticker ZCSH. Any holder of a traditional securities account can now access it.

Digital Currency Group, the parent company of Grayscale, is also said to be holding non-binding discussions to acquire an additional 200,000 ZEC via a subsidiary. Grayscale relates this movement to what it calls the “hard money” thesis, the idea that an asset with a strictly capped supply (21 million ZEC, as with Bitcoin) deserves a valuation premium as institutional interest grows.

Under the hood, the network is also accelerating

The technical part follows the same movement. The developers behind Zakura, a new Zcash client launched in July, have released cryptographic tools that reduce the time to construct a confidential transaction from more than three seconds to less than 200 milliseconds on mobile, a step deemed necessary for the network to keep up with daily use.

At the same time, a governance vote on the next network update, called NU7, is taking place until September 14 to resolve several technical questions, including the possible reduction of the time between blocks.