After a 1500% surge, ZEC shows signs of overheating. Historically, there is an 80% risk of a correction.

Privacy coin Zcash (ZEC) has surged over 1,500% in the past two months, but on-chain data issues a strong overheating warning. The CryptoQuant spot trading volume bubble chart shows ZEC with the largest “red bubble” in history, while the weekly Relative Strength Index (RSI) reaches a historic high of 94.24. Subsequently, the price has retraced 35% from its peak.

Historical patterns indicate that similar overheating signals have preceded over 80% of the sharp declines during the 2021 cycle. Technical analyst Altcoin Sherpa describes ZEC’s current trend as a “slow climb often ending in violent correction.” If the 20-week exponential moving average (EMA) at $440 is broken, the price could further decline to $311.

ZEC Epic Rally and Market Overheating Signs

Zcash achieved over 1,500% gains between September and October 2025, becoming one of the best-performing altcoins in this cycle. This explosive rise was driven by three main factors: easing regulatory uncertainty around privacy coins, expectations of technological upgrades, and market speculation on low-cap, high-volatility assets. However, behind this rally lies serious market imbalance—short-term traders’ share surged, spot trading volume spiked abnormally, and derivatives open interest reached dangerous levels. CryptoQuant’s Spot Volume Bubble Map labels this as “overheated,” a signal that has historically appeared before local tops.

This overheating is not only reflected in price but also in on-chain activity. Daily active addresses, large transactions, and exchange inflow/outflow ratios all hit historical peaks. Notably, during the 2021 cycle, ZEC also exhibited similar patterns: RSI exceeding 90, followed by a decline of over 80% within 12 months. The current 35% correction may just be the start of a prolonged retracement, especially as macro factors weaken overall risk appetite, leading high-beta assets like ZEC to be sold off first.

Technical Indicators: From RSI Extremes to Key Moving Averages

ZEC’s weekly RSI hit 94.24 at the end of October, the highest level ever for this token. RSI above 70 is typically considered overbought, and above 90 is extremely rare, often signaling a major turning point. Historical data shows that during the 2018 and 2021 cycles, RSI exceeding 85 was followed by deep corrections of 45% to 90%. The current price has fallen 35% from its high but remains relatively moderate compared to past corrections. The 20-week EMA is currently at $230, which could serve as a medium-term support target.

Intraday charts show ZEC holding above the 20-week EMA at $440, which has acted as a dynamic support during the recent bullish run. If this level is broken, the next key support is the 50-week EMA at $311. Noted traders Edward Morra and DarkSide expect a retracement to around $500 before a potential resumption of the uptrend. Arthur Hayes’s short-term target of $900–$1,000 remains possible if ZEC can establish a solid base at current levels and attract new institutional inflows.

Key Data on ZEC Overheating Signals

Momentum Indicators

• 2-month gain: over 1,500%
• Weekly RSI: 94.24 (all-time high)
• Retracement from high: 35%
• 20-week EMA: $230

Historical Comparisons

• Overheating correction in 2021: over 80%
• Typical retracement: 45%–90%
• Current support: $440 (20-week EMA)
• Next support: $311 (50-week EMA)

Potential Variables and Catalysts for a Bearish ZEC Outlook

Despite technical bearish signals, several factors could alter ZEC’s trajectory. First, the privacy coin sector is experiencing fundamental improvements: legal challenges to Tornado Cash sanctions by the US Treasury, the EU’s MiCA regulation exemptions for privacy assets, and Zcash’s upcoming Halo 2 upgrade (which enhances transaction efficiency and reduces trust assumptions). These developments could attract long-term investors rather than short-term speculators.

Second, if Bitcoin resumes a new rally after government reopening, altcoins tend to show higher resilience. Historical data indicates that high-market-cap altcoins outperform Bitcoin by 15–40% in the 1–3 months following Bitcoin’s previous highs. Additionally, if spot ZEC ETF applications are considered (though unlikely), it could significantly change market structure. Lastly, growing institutional demand for privacy protection could reinforce ZEC’s narrative as a “digital gold supplement,” especially amid geopolitical tensions.

ZEC Trading Strategy: Risk Management and Position Adjustment

Existing holders are advised to take partial profits, especially around the $800–$900 resistance zone. Risk-tolerant traders might set a stop-loss at $440; if broken, reduce positions by at least 50%. Given ZEC’s volatility is 3–4 times that of Bitcoin, position sizes should be limited to about 5% of the portfolio. Implied volatility in the options market has reached 180% over one month, making put options costly; consider spread strategies to reduce premium costs.

For short sellers, wait for two key signals: RSI falling below 60 and stabilizing, and a three-day consecutive close above the 20-week EMA. Dollar-cost averaging in the $300–$500 range may be reasonable, but recognize that bottom formation typically takes 2–4 months. Due to relatively concentrated liquidity, trading outside major CEXs carries risks of wider spreads.

Conclusion

Zcash’s remarkable rally demonstrates the explosive potential of altcoin markets but also highlights overheating risks. Both historical patterns and technical indicators suggest a significant correction could occur. However, the long-term value proposition of privacy coins remains intact. Investors should avoid FOMO, focus on risk management, and view current retracements as healthy market behavior. The real investment opportunities often arise after the hype subsides, not during the bubble.