Key Insights
- The Wyckoff Theory suggests that the Zcash price will crash soon.
- The coin will also plunge because of mean reversion.
- It may also plunge as investors sell the halving news.
Zcash price has surged in the past few weeks, becoming a top-20 token and the biggest player in the privacy token industry. ZEC jumped from the year-to-date low of $24 in April to a record high of $740. This article explores the top reasons why the token may be on the verge of a strong bearish breakdown.
Zcash Price to Crash as it Moves to the Distribution Phase of the Wyckoff Theory
The first main reason why the Zcash price may be on the verge of a strong bearish breakdown is the Wyckoff Theory. This theory explains how asset prices move over time.
The Wyckoff theory identifies the four main stages that assets go through: accumulation, markup, distribution, and markdown. The accumulation phase is characterized by horizontal movements, low volatility, and volume.
As the chart below shows, the token remained inside the narrow range between the support and resistance levels at $30 and $55 between January and October this year. All attempts to rebound faced substantial resistance, and all attempts to drop faced support at $30.
The coin then moved to the markup phase of the Wyckoff Theory. This phase is characterized by higher demand than supply. It also happens when there is a significant increase in demand and Fear of Missing Out (FOMO) among investors.
This phase is then followed by the distribution and markdown phases, where investors start to sell their tokens. In most cases, this happens when top oscillators like the Relative Strength Index (RSI) and the Stochastic Oscillator have moved to the overbought level, which has already happened, as the chart shows.
ZEC Price to Crash Because of Mean Reversion
The other main reason why the ZEC price may crash soon is known as mean reversion. This is a common concept in the financial market that suggests that an asset will always move back to its historical averages.
It normally happens after an asset diverges from its historical levels and when the standard deviation rises. In this case, the standard deviation jumped to the highest level on record as the Zcash price jumped.
At the time of publishing, ZEC price was $488, much higher than the 200-day and 100-day Exponential Moving Averages (EMA) of $140, while the 200-day average is at $213.
Therefore, the mean reversion principle suggests that the token will retreat so that it can move close to these moving averages.
Buy the News, Sell the News
One reason why the Zcash price is soaring is that investors are anticipating the upcoming halving event, which is set to happen this month. Halving is a situation where the block rewards offered to miners are slashed by half to reduce its inflation.
In this case, the block rewards will be slashed from 3.125 to 1.5625 later this month. It will be the third halving since the coin was launched. As with Bitcoin, it is common for an asset’s price to surge before the halving event happens.
Therefore, there is a likelihood that the token will resume the downtrend as investors sell the halving news.
History Suggests that a Crypto that Surges Often Retreats
Additionally, history suggests that no asset goes up forever. At some point, even the longest bull market finds its resistance, leading to a pullback.
A good example of this is XRP, which surged by nearly 500% in 2024 following Donald Trump’s victory. The hope was that the token would benefit as the new Securities and Exchange Commission (SEC) ended its lawsuit. XRP price surged from $0.50 in November to $3.40 in January. The token then plunged to $1.6 in April as it lost momentum.
The same happened with Trump Coin, whose price surged in January before his inauguration and then crashed to a record low afterwards, leading to substantial losses.
Crispus is a distinguished Financial Analyst at, bringing over 12 years of expertise in cryptocurrency markets, specializing in Bitcoin and altcoins. Renowned for his sharp insights at the nexus of market trends and breaking news, Crispus delivers actionable analysis to empower investors. His work is prominently featured across leading platforms, including BanklessTimes, CoinJournal, HypeIndex, SeekingAlpha, Forbes, InvestingCube, Investing.com, and MoneyTransfers.com, cementing his reputation as a trusted voice in the financial world.
