Privacy-centric cryptocurrency Zcash has surfaced as the day’s leading performer, with its value skyrocketing 16% in the last 24 hours, in contrast to continued losses in the broader crypto market.
Nonetheless, both on-chain and technical indicators indicate that the token’s momentum might be faltering. ZEC’s price has been fluctuating within a narrow range, and bearish sentiment seems to be increasing.
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ZEC’s Rally Loses Conviction
The consistent decline in ZEC’s futures open interest over recent days suggests a diminishing demand for the altcoin.
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Down 22% over the past three sessions, the decrease in ZEC’s futures open interest indicates that investors are closing positions instead of opening new ones. This implies that the recent surge of bullish activity may be losing its strength.
Open interest refers to the total number of outstanding futures or options contracts that have not yet been settled. It serves as an indicator of market participation and trader engagement.
When open interest rises, it signifies new capital flowing into the market. Conversely, a decline indicates that traders are exiting their positions—either taking profits or limiting losses—resulting in weaker price trends.
In ZEC’s case, the reduction in open interest during the current rally suggests that the price increase is not backed by new capital influx. This could imply that the momentum may be temporary, and the altcoin might face a pullback once short covering diminishes and real demand does not materialize.
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Additionally, examining the daily chart reveals that the gap between the upper and lower bands of ZEC’s Bollinger Bands has increased. This indicates heightened volatility and hints that the token’s recent rise might be overstretched.
The Bollinger Bands indicator assesses market volatility by plotting two standard deviation lines above and below an asset’s moving average. A widening of the bands signals increased volatility, indicating larger and less stable price movements.
A notable widening, especially following a rapid price increase, as seen in ZEC, suggests that the asset may be overbought, raising the probability of a short-term correction.
ZEC’s Price Risks Falling Toward $246 Amid Cooling Demand
This interplay of decreasing market participation and increasing volatility places ZEC at risk of losing some of its recent gains. In this scenario, its price could drop towards $236.74.
If this support level fails to hold, the altcoin’s price might sink further to $194.52.
However, a revival in demand for ZEC could change this bearish perspective. In such a case, the altcoin’s price might surge to $305, a peak last seen in November 2021.
