Key Points:
The astonishing 500% increase in ZEC in October was primarily driven by celebrity endorsements and the liquidation of short positions.
Technically, the rising wedge pattern has issued a warning, indicating a potential 30% pullback to the $260-$270 support area in November.
ZEC sent shivers down the spines of cryptocurrency short investors on Halloween this year, as it was one of the few coins to achieve significant gains on Friday.
This privacy-focused cryptocurrency rose 7.75% to $390.75, reaching its highest level since 2018. In contrast, the overall cryptocurrency market cap fell by 2.50% during the same period.
ZEC's price soared nearly 500% in October, starkly contrasting with the overall cryptocurrency market's decline of 4.50%.
What factors drove ZEC's remarkable comeback?
Public endorsements from industry figures injected strong momentum into ZEC's bullish narrative.
ZEC's price began to surge after renowned investor Naval Ravikant tweeted on October 1, calling it "insurance for Bitcoin." On that day, ZEC's price jumped over 60% and has maintained a strong upward momentum since.
Mert Mumtaz, co-founder and CEO of Helius, a company focused on Solana development, publicly set a target price of $1,000, making ZEC a social media focal point and attracting momentum traders.
Recently, BitMEX co-founder Arthur Hayes further boosted market sentiment by announcing a target price of $10,000, prompting ZEC's price to rise by 30%.
These surges are reminiscent of Dogecoin (DOGE) during its market performance in 2021. According to researcher Dabian Fablander's data analysis, the meme coin averaged a 33% increase after Musk posted supportive tweets.
The large-scale liquidation of short positions provided additional momentum for ZEC's price surge.
According to CoinGlass data estimates, ZEC futures saw a cumulative liquidation of nearly $65 million over the past two weeks, with more than half coming from short positions.
This liquidation imbalance indicates that ZEC's breakout was primarily driven by a classic short squeeze, where traders shorting the privacy coin were forced to cover their positions as prices rose, further pushing up the price.
Another key factor accelerating the rise is the fear of missing out (FOMO) among retail investors, clearly evidenced by the surge in online searches for the keyword "Zcash" throughout October, especially around the days before and after the price increase.
The buying triggered by liquidations and the ongoing FOMO among retail traders created a positive feedback loop, sustaining a rally that far exceeded initial catalyst expectations.
On the daily chart, ZEC is forming a rising wedge, a pattern that often signals a bearish reversal after a prolonged uptrend.
The upper boundary of the wedge is currently around $450, suggesting that ZEC may continue to climb toward this peak before momentum wanes.
However, analysts point out that there is a bearish divergence between the rising price of the token and the declining RSI reading (currently close to 74), coupled with a continuous drop in trading volume, indicating that buying pressure is weakening.
If sellers push ZEC below the wedge's lower trend line, this pattern could confirm a 30% decline to the $260-$270 area in November.
The $260-$270 area aligns with the 20-day exponential moving average (20-day EMA, shown as the green wavy line in the chart).
Related: Zcash (ZEC) hits an 8-year high, with a market cap of $6.2 billion, surpassing Monero (XMR) to become the leading privacy coin.
This article does not constitute any investment advice or recommendation. All investment and trading activities carry risks, and readers should conduct their own research before making decisions.
Original article: “Why is Zcash (ZEC) the only crypto pumping right now?”
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