Over 1% of ZEC Supply Unshielded in Early 2026, Sparking Sell-Off Concerns

Over 1% of Zcash (ZEC) supply was recently unshielded, raising concerns about potential sell-offs and market pressure. This activity, observed in early January 2026, saw more than 200,000 ZEC moved from shielded pools to transparent ones. The movement suggests holders are preparing funds for trading or liquidation.

The unshielding event occurred as ZEC continues to underperform the broader cryptocurrency market. Altcoin indices have shown signs of recovery, but ZEC's price dropped by approximately 7% in early 2026. This divergence from overall market trends has sparked investor scrutiny.

Unshielding is a necessary step for Zcash to be traded on exchanges or sold. The process involves converting privacy-protected funds into transparent balances, which are visible on public blockchains. This has historically been a precursor to large transactions or liquidity preparation.

Why the Move Happened

The unshielding appears to be part of a broader trend of reduced activity in shielded pools. Data from the first week of January 2026 showed deposits into shielded pools slowing down. The total ZEC in shielded pools fell back to around 4.86 million from a peak of over 5 million at the end of 2025.

A major unshielding event was followed by a large transfer to Binance. A whale sent 74,002 ZEC—worth about $35.75 million—to the exchange within 24 hours. Such movements are often interpreted as signs of position-setting or liquidity prep.

CoinAnk reported that ZEC ranks among the altcoins with the largest derivative capital outflows over the past week. Short positions on the asset have also increased, indicating bearish sentiment among traders. This suggests that the market is bracing for downward pressure.

How Markets Responded

ZEC's price dropped to $490 in early January 2026, down from $530. This decline occurred despite a broader altcoin market recovery, where the TOTAL3 index rose by 7% over the same period.

Market observers have highlighted the significance of the unshielding event. Ted, an investor, noted that large moves like these are rarely random. He described the whale's actions as a clear signal for positioning or liquidity preparation.

The price action has also been influenced by broader altcoin dynamics. Zcash competes with other privacy-focused assets like Monero (XMR) and Dash (DASH), which have also underperformed in 2026. This has led Artemis to label privacy coins as the weakest-performing sector in the current market.

What Analysts Are Watching

Grayscale recently highlighted Zcash as a potential growth opportunity despite the recent price correction. The firm expects the privacy sector to strengthen in 2026, supported by rising institutional interest. However, the recent unshielding event introduces uncertainty.

Analysts are also monitoring the impact of the Grayscale Zcash ETF filing. If approved, the ETF could bring significant institutional inflows to ZEC. This would contrast with the bearish short-term sentiment seen in the derivative markets.

The shielded pool activity remains a key metric for understanding ZEC's market sentiment. With over 30% of the supply currently locked in shielded pools, any further outflows could signal ongoing pressure from holders. Institutional adoption and regulatory clarity will also play a role in determining the asset's long-term trajectory. This is particularly relevant given the current market conditions.

Investors are advised to watch for further on-chain activity and price action in the coming weeks. The unshielding event and recent bearish indicators suggest caution, while long-term prospects for privacy coins remain subject to broader market and regulatory developments.