This Little-Known Cryptocurrency Is Up 217% for the Year. But Is It a Buy?

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Key takeaways

Zcash has surged 217% for the year but remains down nearly 75% since its 2016 launch.
Grayscale launched the first spot Zcash ETF at the end of August, attracting over $500 million.
Privacy coins like Zcash and Monero are gaining renewed interest due to rising demand for anonymous transactions.

Right now, Bitcoin is getting all the attention from crypto investors. And rightfully so -- it's up a staggering 40% from its summer lows. But there are plenty of other cryptocurrencies skyrocketing in value even faster than Bitcoin.

Case in point: Zcash is up a heart-pumping 90% over the past 30 days and an even more impressive 217% for the year. So should investors be lining up to buy Zcash?

Lessons from a decade of Zcash

The performance numbers are impressive, but zoom out and look at a long-term chart for Zcash, which launched in October 2016. For much of its existence, its price has flatlined. Take a look for yourself -- it's only in the past year that Zcash has shown any real signs of life.

Even with its massive rally, Zcash is still down almost 75% since its launch, and it's trading nowhere near its all-time high of $5,942 from a decade ago.

So this is really a tale of two different cryptos. One crypto is skyrocketing in value and now ranks among the top 10 cryptocurrencies by market cap. The other crypto is experiencing a dead cat bounce and probably won't sustain its massive gains.

Catalysts for Zcash

There are a few important catalysts for Zcash. For example, Grayscale launched the first-ever spot Zcash ETF at the end of August. Thus far, the Grayscale Zcash ETF launch has been a rousing success. It has now attracted over $500 million from investors.

But the big macro catalyst involves the rising popularity of so-called “privacy coins.” These cryptocurrencies -- which enable users to shield their blockchain wallet addresses and transaction details from others -- are having a moment right now. And the two big privacy coins right now are Zcash and Monero, which are up 30% for the year.

New uses continue to be found for these privacy coins, reigniting investor interest. For example, Hyperliquid recently announced plans to offer privacy-enabled trading in Zcash-based perpetual futures.

Is Zcash a buy

If you're a short-term momentum trader, Zcash could be worth a closer look. Both Zcash and Monero have been big movers this year, and the upward momentum could continue through year-end.

But if you're a long-term buy-and-hold investor, there are likely better buys out there. Just take another look at that long-term chart for Zcash. Do you really want to be buying a coin that flatlined for the better part of a decade?

Privacy coins were never intended to be long-term, buy-and-hold investments. They were intended to enable new types of completely anonymous online transactions, and that has raised all sorts of legal and regulatory questions. If you're buying privacy coins right now, this distinction is vital.

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