Zcash (ZEC) is up almost 20% in the last 24 hours, helped by the euphoria surrounding the decisive transition of its core protocol from Proof-of-Work (PoW) to Proof-of-Stake (PoS).
The price of ZEC hit an intraday high of $ 188.80 on Binance, after rising two days in a row more than 27%. The cryptocurrency’s upward move also cleared a large chunk of the losses it had faced earlier this week, following a pullback in the cryptocurrency market.
The price of ZEC rose after the main developer of the cryptocurrency, Electric Coin Company (ECC), announced that it would move the Zcash protocol from PoW to PoS in the next three years. The non-profit organization noted that the update would limit downward price pressures for ZEC by eliminating miners who “immediately liquidate” the token for Bitcoin or fiat..
“This change will also increase ZEC’s utility through capabilities that include performance generation through staking and a possible path to on-chain governance mechanisms for ZEC hodlers“added Josh Swihart, ECC’s senior vice president of growth, adding:
“There are other benefits of going proof of stake including reducing ZEC’s energy footprint, providing a potential path to on-chain governance mechanisms, and supporting interoperability by addressing issues with the purpose of transactions. proof-of-work, among other reasons. “
ZEC bulls take advantage of PoS FOMO
Unlike PoW, PoS mechanisms allow a person to mine or validate bulk transactions based on the number of underlying tokens they hold. In return, the so-called “validator” receives rewards in the form of returns.
Ethereum, the leading smart contract platform by market capitalization, also started its transition from PoW to PoS after introducing a dedicated smart contract.. In response, users blocked around 8.33 million Ether (ETH) tokens in the so-called Ethereum 2.0 direction, effectively kicking them out of the active offering.
ECC’s announcement promises that users could staking a portion of their ZEC holdings into a smart contract dedicated to Zcash to become validators on its blockchain.. Thus, as a result, more ZEC may end up going out of active circulation due to lockdown periods, versus its Bitcoin-like fixed supply of 21 million tokens.
Barry Silbert, Founder and CEO of Digital Currency Group, a venture capital company, tweeted on Saturday I would “buy more” Zcash tokens, citing your supply limit. His tweet coincided with a sudden rise in the price of Zcash against the US dollar and Bitcoin (BTC).
$ BTC max supply: 21 million$ ZEC max supply: 21 million$ ZEN max supply: 21 million
– Barry Silbert (@BarrySilbert) November 20, 2021
Maximum BTC offer: 21 million. ZEC maximum supply: 21 million. Maximum ZEN Supply: 21 million
Nevertheless, some analysts argued that Zcash would not have a supply cap after implementing PoS.
For example, on-chain analyst Willy Woo, he pointed in his reply to Silbert’s tweet that if Zcash could “decide to extend the development impact tax”, and “if it can switch to PoS and eliminate miners”, then he’s sure that the cryptocurrency does not have a maximum supply.
“And,” Woo added, “that’s ignoring the 2018 inflation bug and assuming that we could indeed audit the supply“, referring to the infamous vulnerability from Zcash that could have created infinite ZEC tokens.
Minutes after Woo’s comments on ZEC’s dubious supply cap, Silbert tweeted:
Wow, you all hate $ ZEC. I’m going to buy more
– Barry Silbert (@BarrySilbert) November 20, 2021
Wow, you all hate $ ZEC. I will buy more.
Inflection zone
ZEC’s latest push to the upside sent it into a tipping zone, notable for its record of catching the rises of the cryptocurrency.
Specifically, the trading range defined by USD 170 – USD 205 (the reddened area in the chart shown below) has previously provided selling opportunities for traders. Even recently, the price of ZEC retraced after entering said range, while extended declines towards the purified rising trend line are observed.
A clear break in the trend may appear after the ZEC price closes above the inflection zone, accompanied by an increase in trading volumes., thus targeting the Fibonacci retracement levels at $ 247 and $ 316. Conversely, a decisive close below $ 170 could send the ZEC toward $ 136.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risk. You should do your own research when making a decision.
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