The privacy-focused moat that previously supported assets like Zcash [ZEC] has significantly weakened lately. Its erosion can be reflected in the price performances across related tokens too.
As expected, ZEC has not been immune to such a broader decline. In fact, the altcoin fell by approximately 16% over the last 24 hours alone as selling pressure intensified. And yet, on the one-hour charts, some signs of stablization between $218 and $212 could be seen too.
Fair value gap signals downside risk before recovery
At the time of writing, the altcoin’s price structure suggested that ZEC’s prevailing weakness may not be nearing exhaustion. On the daily timeframe, for instance, the crypto formed a Fair Value Gap (FVG) – Alluding to the presence of unfilled market orders.
An FVG typically acts as a magnet for the price. When positioned above the press time price, it often serves as a sell-side zone. On the contrary, an FVG below the price functions as a demand zone.
On the charts, the identified FVG lay below the price and represented a demand area. While this finding might support the case for a rebound, it also suggested that the price may need to trade into this zone before a sustained recovery develops. At press time, this range sat between $116 and $77 – Representing the extreme bearish-to-bullish scenario.
The depth of any further decline will largely depend on whether the support level that triggered ZEC’s prior 270% rally—culminating in its all-time high of $750 just over a month ago—continues to hold.
That same support level seemed to be forming a recognizable double bottom pattern, with the price aligning around $202.44. Historically, this structure has often preceded bullish reversals.
While not a guarantee, the pattern increases the probability that buyers may defend this zone once again – Providing a technical basis for a rebound attempt.
Liquidity clusters, perpetual market favor upside movement
Liquidity distribution also seemed to support the rebound thesis. At press time, the market structure underlined minimal liquidity below the spot price, reducing the incentive for aggressive downside continuation.
Liquidity clusters highlight areas where large orders are concentrated. When liquidity is heavier above the price, markets tend to gravitate upwards to fill those orders.
On the charts, liquidity appeared to be notably denser above press time price levels, particularly between $250 and $260. A move towards this zone would align with the previously identified, unlabeled FVG zone, reinforcing the technical case for a near-term upside move.
Perpetual market data has also been leaning constructive. Open Interest (OI) weighted funding rates were positive, indicating stronger positioning from long participants relative to shorts.
Here, the OI-weighted funding rate measures which side of the derivatives market exerts greater control. Sustained positive readings means that long-side liquidity will continue to dominate.
Such accumulation of demand from perpetual traders could influence directional bias, supporting further upside from the press time support zone.
Spot market inflows signal retail interest
Finally, Spot market activity hinted at renewed interest from retail investors too. On Thursday, 7 February, ZEC saw its largest single-day spot inflows since 31 January, with $13.7 million worth of tokens moved into private wallets.
However, early data for Friday revealed sellers temporarily regaining control, with net outflows of $5.69 million exceeding buyer purchases. Such a shift remains fluid, and flows could still rebalance by the end of the trading session.
Despite short-term volatility, the altcoin’s price structure, liquidity positioning, derivatives data, and recent spot inflows all suggest that the probability of a rebound remains elevated.
Market sentiment continues to favor recovery too. However, confirmation will depend on how the price reacts around key support and liquidity zones in the sessions ahead.
Final Thoughts
- ZEC has been constrained between two key technical levels that are likely to determine whether the altcoin stages an immediate recovery or extends its decline.
- Liquidity formation and perpetual market activity might hint at a possible upside.
