This article will explain which market factors affect cryptocurrencies, and more specifically, what tends to affect the value of ZCash so that we may understand what can push the ZEC to USD price up. In the headline of ZCash’s website, its creators describe ZCash as “Internet Money”. This in itself is not a new idea ever since the introduction of Bitcoin in early 2009. However, their introductory paragraph goes on to explain how ZCash is different from most other cryptocurrencies. Their website explains how most other cryptocurrencies, including Bitcoin, are not and never have been anonymous and private. While your name and surname may not directly appear on the blockchain when you use Bitcoin, it is correct to call such transactions ‘pseudonymous’. What this means is that although it does not directly identify you, that it is perfectly possible, through the use of advanced searching techniques, to find out who actually sent money to whom, when the money was sent, and how much was sent. This means that no transactions on the Bitcoin blockchain are private. However, with ZCash, the sender, recipient, and value of transactions are all hidden through a protocol called zero-knowledge transactions, and from there, comes the name ZeroCash, or ZCash for short.
The Ups and Downs of the Crypto Market
It is commonly known in the world of cryptocurrency that as goes the Bitcoin price, so go the other cryptocurrencies, which are known as ‘altcoins’, or alternative coins, because they came after Bitcoin. In other words, when Bitcoin experiences major upturns or downturns in its price, other cryptocurrencies are likely to experience similar effects. As the first cryptocurrency on the market, Bitcoin has a huge effect on the prices of altcoins, and there are a few reasons that this is so. Currently, Bitcoin accounts for 34.8 per cent, just over a third of the market capitalization of all cryptocurrencies. One major reason for price correlation is public opinion. Share prices are deeply affected by what people at a given time think of companies, and public opinion for cryptocurrency holdings is no different. Many investors into cryptocurrencies are, in general, new to investing and therefore tend to be more affected by announcements and news about cryptocurrency than they might be if they had more experience. In this way, when China’s central government announces that they are banning Bitcoin exchanges, this announcement may have a disproportionate effect on the price of cryptocurrency. Likewise, if a well-known cryptocurrency exchange gets hacked and has money stolen, it is very likely that many people who are not even using that exchange will become much more cautious about their investments. A second major reason is that many altcoins are actually traded in Bitcoin as well as being traded in national fiat currencies. For this reason, altcoins are more likely to experience sharp dips directly after Bitcoin does, but slightly less likely to experience sharp upturns to the same degree. However, as investors take notice of this trend, it is likely to become a somewhat less pronounced correlation over time. From the above information and with some general investment knowledge, it is clear that cryptocurrencies are currently highly volatile and will likely be so for some time. Cryptocurrencies are not tied to any specific asset, which makes them very susceptible to sentiment and public opinion. What this means is that prices rise and fall rapidly and are highly sensitive to the actions of certain people, especially the 1,000 individual people who collectively own 40 percent of all Bitcoins. It is even possible for these individuals to work together to influence the market in a big way!
Which factors affect ZCash’s price?
ZCash is undoubtedly also affected by the price of Bitcoin. At present, it is only marginally more stable than Bitcoin, and given the newness of cryptocurrency in general, it is much too soon to make pronouncements about ZCash’s relative volatility as compared to Bitcoin. In fact, the correlation coefficient between the daily closing price in US$ of Bitcoin and ZCash over the last year, from February 19th, 2017 to February 19th, 2018 is 0.84, which is an extremely strong correlation index. As such, the factors described in the previous section are the ones most likely to affect ZCash as well. One of the only reasons to suspect that ZCash and Bitcoin may diverge over time is that ZCash’s target audience is much more specific than Bitcoin’s. ZCash intends to be relevant to investors who specifically want to keep their transactions private, which is a small percentage of the user base of cryptocurrency holders. Some of the most useful aspects of cryptocurrency is that it can be used anywhere in the world with the same fees and that it does not require a bank to oversee transactions, and therefore does not depend on individuals who may have a particular agenda. These concerns tend to come ahead of anonymity, and as such, ZCash’s user base may remain small. If you search online for trade recommendations for ZCash, you may find advice that features terms such as ‘Fibonacci retracement’, ‘bullish inverted head’, and ‘shoulder reversal pattern’ to describe trends in prices and pieces of advice suggesting to ‘buy the breakout at 0.05 for medium term gains’. Such advice is above the level and purpose of this article. But they suffice to say that there does exist, even for a lesser-known cryptocurrency such as ZCash, a professional investor class that watches prices daily and makes moves accordingly, and others who post advice online. In conclusion, while ZCash is a separate cryptocurrency with advanced anonymity features, its price volatility, rises, and falls are still closely tied to Bitcoin and other major altcoins, such as Ethereum and Litecoin, and probably will be for some time still in the foreseeable future. Presently, there is little reason to suspect that ZCash will act with any logic of its own - it is far more likely to follow the general cryptocurrency price trend, and prospective investors should be wise to follow and understand these trends.