A brand new ZCAT token charges a 3% tax whenever the token moves and uses the proceeds to distribute ZEC to holders, creating an unusual link to one of crypto’s hottest assets.
Social chatter around ZEC hit six times its August baseline before the price peak, then vanished as the ETF launched.
Zcash has been one of the best-performing assets this year. It has managed to attract significant institutional capital. This week, asset manager Grayscale Investments launched the first exchange-traded fund that tracks the spot price of ZEC.
But interest in the privacy-focused token peaked shortly before its price reached a recent high.
Zcash Crowd Showed Up Early
Data shared by Santiment revealed that social chatter faded by the time the ZEC spot ETF launched. Grayscale converted its 2017 Zcash trust into a spot ETF, which began trading on NYSE Arca on August 25.
Ahead of the launch, the asset climbed from around $509 on August 18 to about $878 on August 23, posting a gain of roughly 72%. Social mentions reached 232 on August 22, which is around six times the usual August baseline. However, that surge in attention did not last.
Mentions had returned to their baseline level by the ETF’s launch day. According to Santiment, social activity peaked one day before ZEC’s price high, which suggested that much of the crowd interest arrived ahead of the market’s high.
Since reaching about $878, the token has pulled back to roughly $789, a decline of around 10% from the recent peak.
Zcash Challenging Bitcoin?
Grayscale Research believes ZEC could emerge as a serious challenger to Bitcoin’s network effects as demand for financial privacy grows. In a report by Head of Research Zach Pandl, the firm said Bitcoin remains dominant among digital currencies. While alternatives such as Litecoin have emerged, none has seriously challenged BTC’s position.
You may also like:
Grayscale, however, stated that Zcash could be different because it combines Bitcoin-like characteristics with privacy features that may become more important as AI-powered surveillance expands. The report also points to the ecosystem’s active development, which aims to address cybersecurity risks, including potential threats to traditional cryptography from quantum computing.
Another advantage is its cross-chain reach through “intents” technology built into modern blockchain wallets, which allows Zcash to function as a private asset hub without requiring broad merchant adoption. ZEC has already gained around 19 times over the past year but remains worth less than 1% of Bitcoin’s market capitalization. Grayscale said Zcash’s financial privacy and other features may be undervalued, thereby leaving room for further upside.
- Hayes exited ZEC after an Orchard privacy bug raised supply doubts.
- He also liquidated HYPE and NEAR while rotating his portfolio.
- The Zcash flaw was patched, but future exploitation cannot be ruled out.
Arthur Hayes, co-founder of BitMEX, has fully exited his positions in Zcash (ZEC), Hyperliquid (HYPE), and NEAR Protocol (NEAR).
The decision comes at a time when the crypto market is still digesting the implications of a flaw found in the Orchard shielded pool, a core component of Zcash’s privacy system.
The move has drawn attention across the digital asset space, not only because of Hayes’ profile as a macro investor, but also due to the nature of the vulnerability, which raised questions about the integrity of ZEC’s supply mechanics inside its shielded environment.
Orchard vulnerability triggers uncertainty in Zcash
The trigger for the sell-off was a vulnerability discovered in the Orchard shielded pool, which is designed to enable private transactions on the Zcash network using zero-knowledge proofs.
The issue raised concerns that, under certain conditions, it may have been theoretically possible to create counterfeit ZEC within the shielded system without immediate detection.
While Zcash developers moved quickly to deploy an emergency patch, the core concern was not just the existence of the bug itself, but the inability to verify whether it had ever been exploited before it was fixed.
Because shielded transactions are designed to be private, there is no straightforward way to retroactively audit all activity in a way that could definitively rule out past abuse.
Market reaction was immediate and sharp.
ZEC experienced a heavy sell-off, with its price falling by over 45% during the height of the reaction.
Liquidity thinned quickly as traders rushed to reduce exposure to an asset suddenly carrying uncertainty around its supply integrity.
The incident reignited a long-running debate around privacy-focused blockchain systems.
While zero-knowledge proofs are widely regarded as one of the strongest cryptographic tools available for privacy, they also introduce complexity that can make historical verification of state changes significantly more difficult compared to transparent blockchains.
Arthur Hayes exits ZEC, HYPE, and NEAR positions
Against this backdrop, Arthur Hayes confirmed that he had fully liquidated his ZEC holdings.
Hayes also closed positions in HYPE and NEAR, signaling a broader portfolio adjustment rather than a single-asset reaction.
Hayes described the situation in blunt terms, stating that what he previously referred to as his “Holy Trinity” thesis no longer held.
The key issue for Hayes was not confirmed exploitation. Instead, it was the presence of unresolved uncertainty.
Even with a patch in place, the inability to definitively prove whether counterfeit issuance had occurred prior to the fix created a level of risk he was no longer willing to carry in a privacy asset.
The Holy Trinity is dead. Sadly due to the Orchard Pool exploit, I had to dump our entire $ZEC bag.
– While I think it’s extremely unlikely of any minting, it cannot be formally cryptographically proved impossible
– The privacy from AI, govt, big tech narrative demands perfection…— Arthur Hayes (@CryptoHayes) June 5, 2026
Alongside the ZEC exit, Hayes also liquidated positions in HYPE and NEAR.
While no direct technical link was identified between those assets and the Zcash vulnerability, the simultaneous sell-off suggests a broader repositioning of capital rather than an isolated reaction.
In brief
How Zcash works
Who invented Zcash?
Did you know?
Key dates
How is Zcash produced?
Zcash, regulators and law enforcement
The future of Zcash
Daily Debrief Newsletter
Start every day with the top news stories right now, plus original features, a podcast, videos and more.
A key Zcash developer has published the first detailed blueprint for a dynamic fee market, opening a community discussion about how the decade-old network should price transactions as ZEC’s price, user activity and institutional interest climb.
The Monday proposal, released by Shielded Labs, lays out a shift away from Zcash’s historically static fee model — originally 10,000 ‘zatoshi,’ later cut to 1,000 — which worked during low demand but eventually contributed to “sandblasting” spam episodes that clogged wallets and congested the chain.
An earlier ZIP-317 proposal’s move to action-based accounting fixed the abuse vector, but retained predictable, low fees that don’t adjust to usage.
Action-based accounting treated every Zcash transaction component — such as spends, outputs, JoinSplits, Orchard actions — as a single uniform “action,” letting fees scale with activity rather than byte size.
Developers say that with ZEC’s recent resurgence, new retail onboarding and the emergence of Zcash digital-asset treasuries, the status quo is becoming less tenable.
It said some users have started to report rising transaction costs in ZEC terms, and edge-case scenarios — like large sets of tiny user transactions costing double-digit ZEC to shield — show how fee rigidity breaks down when token prices climb.
The proposed mechanism introduces a simple, stateless dynamic fee design built around “comparables,” or the median fee per action observed over the prior 50 blocks, padded with synthetic transactions to simulate always-on congestion.
The median becomes the standard fee, bucketed into powers of ten to reduce linkability and avoid leaking user information. Under stress, a temporary priority lane opens at 10× the standard fee, giving users a way to compete for block space without redesigning the protocol.
The system is designed to roll out in phases. First is off-chain for monitoring, then as wallet policy, and only later — if approved — as a simple consensus change with expiry-height limits and power-of-ten fee rules.
That avoids the complexity and fork risk of EIP-1559-style mechanisms while keeping Zcash’s privacy constraints intact.
Other ideas floated include using mining difficulty as a long-term heuristic for USD-denominated fees to tune prices based on mempool pressure.
ZEC traded around $395 on Tuesday, up more than 12% in 24 hours as traders digested the first concrete roadmap for fee reform since ZIP-317.
