Zcash's Rally Built on Sand: 30% Crash as Indicators Turn Bearish

Zcash (ZEC) has surged to a near-year high of $180, driven by a 400% rally from its September lows, but technical and on-chain indicators now suggest a potential bull trap with a 30% crash risk. The price spike followed the announcement of Grayscale's Zcash trust, which has raised speculation about an eventual ETF filing. However, recent data reveals weakening momentum and speculative over-leveraging, signaling heightened vulnerability to a reversal.

Technical analysis highlights bearish divergence in key metrics. The ZEC price chart shows a rising wedge pattern, with the Relative Strength Index (RSI) forming lower highs despite higher price peaks, indicating waning buying conviction. On the 12-hour timeframe, the token approached the upper trendline of this pattern but failed to sustain momentum. A breakdown below $151 (the 0.236 Fibonacci level) could trigger a decline to $120, a 30% drop from current levels. A deeper correction to $97 or $61 is also possible if institutional selling intensifies.

On-chain data corroborates the bearish narrative. The Chaikin Money Flow (CMF) indicator, which tracks buying and selling pressure using volume and price, has declined since October 1, suggesting that large capital inflows are fading. While CMF remains above zero, the series of lower highs indicates that institutional and whale positions are being quietly unwound. This trend often precedes a shift in market momentum, as retail enthusiasm outpaces fundamental demand.

Derivatives data adds to the risk profile. On Binance's ZEC/USDT perpetual pair, cumulative long liquidations reached $16.05 million, dwarfing short liquidations of $3.65 million. This imbalance reflects over-leveraged long positions across exchanges, creating a potential cascade of forced selling if prices dip. A sharp reversal could accelerate the decline, as liquidations compound downward pressure.

Market psychology further supports the bull trap thesis. The ZEC price surge has drawn speculative retail participation, but institutional exits and bearish divergence in technical indicators suggest a lack of durable demand. Historical patterns in bull traps often involve sharp rallies followed by rapid reversals as profit-taking and panic selling take hold. Traders are advised to monitor key resistance levels, including $222 (the 0.786 Fibonacci extension), which, if breached, would invalidate the bearish scenario.

Analysts caution that the current rally is being driven by short-term speculation rather than sustained institutional interest. The Grayscale announcement, while bullish in the long term, has been leveraged by market participants to exit positions at elevated prices. This dynamic, combined with the wedge pattern's breakdown risk, underscores the need for caution. A decisive move below $151 would confirm the bearish case, potentially triggering a cascade of stop-loss orders and exacerbating the sell-off.

The broader crypto market context also weighs on ZEC. Recent liquidation events on exchanges like Bybit, where $16 million in leveraged long positions were wiped out, highlight the fragility of leveraged markets. While ZEC-specific data is more contained, the interconnectedness of crypto markets means that a broader downturn could amplify ZEC's vulnerability.

In summary, ZEC's technical and on-chain signals point to a high-probability bearish scenario, with a potential 30% correction looming. Traders are advised to adopt risk mitigation strategies, including stop-loss orders, to navigate the volatile environment. The coming days will be critical in determining whether the rally is a genuine breakout or a classic bull trap.

Source: [1] Zcash Price Prediction: Why ZEC Jumped and Why it May Crash ... (https://www.banklesstimes.com/articles/2025/10/04/zcash-price-prediction-why-zec-jumped-and-why-it-may-crash-soon/)

[2] Zcash (ZEC) Price Chart Screams a Bull Trap With 30% Crash Risk (https://finance.yahoo.com/news/zcash-zec-price-chart-screams-093000901.html)

[3] Understanding Bull Traps: Avoid Investment Pitfalls in ... (https://www.investopedia.com/terms/b/bulltrap.asp)

[4] Zcash (ZEC) Price Prediction: 2025, 2026 - 2030 (https://coinpedia.org/price-prediction/zcash-zec-price-prediction/)