Zcash (ZEC) has tumbled by more than 20% from its all-time high, as outflows from Grayscale's ZCSH exchange-traded fund and mounting geopolitical tensions weighed on the privacy-focused cryptocurrency. Its shielded transactions use zero-knowledge proofs to conceal the sender, recipient, and amount of a transfer — a capability that sets the network apart from blockchains where those details are publicly visible.

ETF Outflows Mark First Negative Week Since August

Grayscale's ZCSH ETF recorded approximately $93.6 million of net outflows in the week ending October 2, its first negative week since late August. According to the analysis, increasingly negative geopolitical developments in weeks and expectations of Federal Reserve rate hikes may have driven the withdrawals, as most of the Zcash-specific good news had already been priced in. Flow data from the fund is watched as a gauge of demand from investors who prefer to access ZEC through a brokerage account rather than by holding the token directly.

NU7 Upgrade Hits Testnet Ahead of Schedule

Zcash activated the NU7 upgrade on public testnet on October 4, slightly ahead of the previously expected October 6 date. The upgrade reduces the target block time from 75 seconds to 25 seconds — cutting the interval between blocks to a third of its previous length — and introduces a Network Sustainability Mechanism, along with new limits for shielded transactions.

Developers will assess the results and make the final mainnet activation decision on October 20, with November 5 currently targeted for mainnet activation.

US-Iran Developments in Focus

With a light calendar this week, US-Iran developments will likely remain the market's main focus. A breakthrough in negotiations would be positive for Zcash, as it could trigger a further unwinding of aggressive Fed rate hike expectations. Conversely, a prolonged stalemate or a deterioration in the situation could continue to weigh on risk sentiment and keep a lid on the broader crypto market.

Technical Analysis

On the daily chart, Zcash broke below its major upward trendline and extended losses as sellers piled in, targeting a drop toward the 1,031 level. If the price reaches that area, buyers could step in with defined risk below the level to position for a rally into new highs. Sellers, on the other hand, would look for a break lower to extend the drop toward the 800.00 level.

On the 4-hour chart, a minor upward counter-trendline has defined the recent pullback. Buyers may lean on the trendline, with defined risk below it, to position for a rally into the 1,500 level, while sellers would view a break lower as a cue to increase bearish bets toward the 1,031 level.

On the 1-hour chart, a minor downward trendline is defining the current bearish move into the 4-hour trendline. A bounce from the 4-hour trendline could see sellers lean on the downward trendline, with defined risk above it, to keep targeting new lows. Buyers, meanwhile, would look for a break higher to increase bullish bets toward the 1,500 level.

Upcoming Catalysts

This week's calendar features the US ISM Services PMI on Monday, FOMC meeting minutes on Wednesday, the latest US Jobless Claims figures on Thursday, and the University of Michigan Consumer Sentiment survey on Friday. The releases could shape the same Federal Reserve expectations that the analysis flagged behind the recent withdrawals, keeping macro data on the watchlist alongside the October 20 NU7 decision.