ZEC's Growing Short Position on Hyperliquid: A Cautionary Signal for Investors?

The crypto derivatives market has long been a battleground for bulls and bears, but Zcash (ZEC) is now at the center of a high-stakes showdown on Hyperliquid. With short positions ballooning to unprecedented levels and open interest hitting record highs, the question looms: Is ZEC's current trajectory setting the stage for a short squeeze-or a bearish correction? Let's dissect the data, sentiment, and risks shaping this critical inflection point.

The Short Position Tsunami

As of November 2025, ZEC's short positions on Hyperliquid have become a focal point of volatility. The largest short, held by address 0xd47, has an unrealized loss of $14.61 million (206%) since opening at $184 per ZEC in early October. This whale has been aggressively adding stop-loss orders to stave off liquidation, while three additional $20 million+ short positions face imminent risks if the price breaches $653–$655.

Meanwhile, address 0x7b7's $19 million short position-showing 134% unrealized gains-remains precarious if ZEC surpasses $683 according to reports. These positions, combined with a $31.75 million short that added $24.848 million in USDC margin to avoid liquidation, highlight the fragility of bearish bets in a rapidly shifting market.

Open Interest and Funding Rates: A Double-Edged Sword

ZEC's open interest on Hyperliquid surged past $674 million in early November, a record high driven by aggressive shorting. Negative funding rates have intensified as short traders pay to maintain positions, signaling a bearish overhang. Yet, 53% of traders on the platform are long ZEC, reflecting growing optimism.

This divergence is critical. While short sellers are betting on a prolonged downturn, longs are capitalizing on ZEC's recent 55.85% monthly surge. The tension between these forces creates a volatile equilibrium-one that could tip dramatically if ZEC's price continues upward.

Institutional Buyers and the Privacy Premium

Amid the bearish noise, institutional demand for ZEC is surging. Cypherpunk Technologies recently acquired 29,869.29 ZEC ($18 million), signaling confidence in Zcash's long-term value proposition. This accumulation, coupled with endorsements from figures like Naval Ravikant and Arthur Hayes, underscores a growing narrative around ZEC's privacy-centric use cases.

Such institutional activity contrasts sharply with the speculative shorting frenzy. While retail traders bet on a correction, institutional buyers are positioning for a future where privacy-focused assets gain mainstream traction.

Short-Squeeze Risks: A Looming Catalyst?

The largest ZEC short on Hyperliquid now faces a liquidation price of a level that would trigger a cascading short squeeze if reached. This is no hypothetical scenario: ZEC's price has already surged over 100% to $750 in November 2025, fueled by the Electric Coin Company's Q4 roadmap and bullish sentiment around privacy enhancements according to market analysis.

Historical data adds urgency. In December 2025, ZEC's 21% price drop saw open interest dip below $500 million according to data, illustrating how quickly bearish momentum can reverse. If ZEC's current rally continues, the $1,112 liquidation threshold could become a self-fulfilling prophecy, forcing short sellers to cover positions and further driving the price upward.

Market Sentiment: Bulls vs. Bears in a Tug-of-War

The battle for ZEC's narrative is far from over. On one side, short sellers are clinging to macroeconomic headwinds and broader crypto market corrections. On the other, bulls are betting on ZEC's unique value proposition-privacy, scalability, and institutional adoption-as a catalyst for sustained growth.

The 53% long position ratio on Hyperliquid suggests retail sentiment is already shifting, but institutional buying could tip the scales. However, the high open interest and leveraged positions mean even a minor price spike could trigger a domino effect of liquidations, amplifying volatility.

Conclusion: A High-Risk, High-Reward Scenario

ZEC's current market dynamics present a classic short-squeeze scenario. The combination of massive short positions, record open interest, and institutional accumulation creates a volatile cocktail. While the bearish case hinges on a return to macroeconomic pressures and ETF outflows according to analysts, the bullish case is bolstered by privacy-driven demand and strategic short-covering.

For investors, the key is to monitor critical price levels ($653–$683) and the actions of major players like Cypherpunk Technologies. ZEC's derivatives market is a microcosm of the broader crypto ecosystem's duality: speculative frenzy meets long-term value. In this environment, patience and risk management are paramount.