Privacy-focused cryptocurrency Zcash (ZEC) has fallen 11% over the past 24 hours, pushing its market capitalization down to $18.5 billion, per Decrypt data, and making it one of the biggest losers of the day.

Launched in 2016, Zcash is one of the longest-running privacy-focused networks, using zero-knowledge proofs to let users shield transaction details, and the token had staged one of the market's strongest rallies in recent months before its current pullback.

Analysts attribute the losses to different factors. Luke Nolan, senior researcher at CoinShares, said the decline likely stems from a buildup of leverage accumulated during the token's "meteoric rise," while other observers point to growing concerns that AI could break cryptographic encryption before quantum computers do — a worry that may be hitting privacy-focused protocols harder than most.

Nolan noted that despite the sharp daily loss, Zcash remains up 460% from its March lows, adding that in a "fragile" crypto market, the largest gainers tend to absorb outsized losses when sentiment turns.

"There was a decent build-up of leverage on way up as this is also a natural consequence of a strong move," Nolan told Decrypt. "More attention brings more perp traders to take on leverage, and when there is a sneeze, the moves get amplified as those leveraged traders are either forced to reduce exposure or get liquidated."

Perpetual futures — derivative contracts with no expiry date that let traders amplify their exposure with borrowed funds — are a main venue for that activity, and forced unwinds can sharpen short-term swings in both directions.

Liquidation data reflects that dynamic. Over the past 24 hours, per CoinGlass data, $17.9 million worth of Zcash long positions were liquidated — a large figure compared to the $7.3 million wiped out on Hyperliquid over the same period.

The race to quantum-proof Zcash

The sell-off comes as industry-wide concerns begin to swirl, some of which could ultimately see positive upside for Zcash.

Last week, Ethereum co-founder Vitalik Buterin and Ethereum Foundation researcher Justin Drake warned that the industry needs to plan for "bunker mode," as AI could break crypto encryption before quantum computers do. The conversation was sparked after OpenAI published major progress in mathematics, which presented concerns for the future of encryption. Quantum-proofing a network means upgrading its cryptographic foundations so they can withstand attacks from quantum computers, machines that could in theory break the public-key systems securing most blockchains today.

"The OpenAI math breakthroughs has caused a lot concern in crypto given the conspicuous lack of cryptography proofs," Ryan Zurrer, founder and director of investment firm Dialectic, told Decrypt. "More complex privacy protocols such as Zcash have the most to lose in a zero-day event if core primitives are rendered obsolete against AI-driven cryptography attacks."

Zcash has been aggressive with its quest to quantum-proof the network. Zakura, a Zcash full node developer, recently said that its team expects the network to be quantum-proofed, as well as reasonably AI-proofed, by January — a timeline that give the roadmap a concrete near-term checkpoint. Its quantum-resistant roadmap "served as a key catalyst" for the token's recent rally, Tim Sun, senior researcher at HashKey, told Decrypt.

"Although actual implementation is still some distance away, it indeed reflects the market's continuous focus on the privacy sector since the beginning of this year," Sun said.

Privacy continues to be a major talking point across the crypto industry. Sun added that the need for privacy will only grow as traditional finance merges with the crypto sector.

"As an increasing volume of traditional financial assets and operations migrate on-chain, privacy protection will no longer be merely an optional add-on," Sun told Decrypt, "but rather a fundamental prerequisite for financial institutions adopting blockchain technology."

The drawdown also coincides with regulatory pressure on financial privacy in Europe. Last week, French lawmakers progressed a law proposal that would require citizens to report crypto holdings equal to or above €100,000 ($112,000), or otherwise face a penalty. The proposed law has received significant backlash in the wake of a wave of crypto-related "wrench attacks," robberies, and kidnappings across the country. Although the law has not yet passed — it still faces further steps in the French legislative process before it could take effect — some investors have looked to privacy protocols as government oversight looms.

Nolan, for his part, pushed back on the narratives that have weighed on the price, arguing that investors should zoom out when assessing Zcash's recent performance.

"I think the French proposed law had little to do with the move, and in my view, it's simply a larger pullback given the meteoric rise," Nolan told Decrypt. "When you put the drawdown in context on the daily chart, even though it's been 35%+, it looks like a blip in comparison to the upmove."

From here, the near-term markers are clear: CoinGlass's liquidation tallies for signs of how much leverage has cleared, Zakura's January target for the quantum-resistant roadmap, and the French bill's path through parliament.