Zcash Crypto Pulls Off Another Weekly Rally But Could Be Headed For A Cliff

Key Insights:

• Zcash crypto (ZEC) price has achieved a robust rebound since Sunday after rallying by almost 40%.
• ZEC price forms bearish divergence against its RSI signaling potential downside ahead.
• ZEC open interest achieves new historic high signaling more derivatives positioning.

Zcash crypto holders are just as happy as Arsenal fans this week, courtesy of the impressive bullish price action it delivered. However, that joy may be short-lived as the cryptocurrency shows signs of a potential retracement.

Zcash (ZEC) crypto price kicked off this week on a bullish leg after previously experiencing a bearish correction in the second week of May.

This latest upside extended the momentum that the Zcash crypto price showed in the first week of May.

For context, Zcash crypto jumped by roughly 39% from its lowest price on Sunday ($490), to its mid-week peak at $690. The latter was the not only a new year-to-date high, but also the highest price point in the last 6 months.

The ZCash price was down to $662 at press time. At this price point, it was only about 12% from retesting its historic high of $750.

Zcash Crypto Risks Another Pullback, Here’s Why

Although Zcash crypto holders may be basking in the glory of its recent bullish aura, their celebration might be short-lived.

This is because the privacy coin is currently showing signs that another correction may occur just as fast as the recent rally.

The ZEC price ticked higher this week compared to its previous local high. However, its RSI pushed lower compared to the previous local peak, forming a price-RSI divergence. This is usually considered a bearish sign.

ZEC price was also overbought at press time. This, combined with the bearish divergence pattern suggest an elevated probability of a reversal.

However, this also warrants a look at the factors driving the rally, as well as other key metrics that may offer insights into the next possible move.

One of the key reasons for the ZEC crypto price rally might be linked to the SEC. The regulatory authority recently concluded an investigation into Zcash, which has been going on for 3 years.

The end of the investigation may have boosted investor sentiment. Similarly, crypto investment firm Multicoin recently revealed that it has been building up a Zcash crypto position.

Multicoin founder Tushar Jain made the revelation during a podcast, citing the rising necessity for privacy.

Will ZEC Price Bow To Profit-taking?

The overbought Zcash (ZEC) crypto price and the bearish divergence pattern underscore downside risk. However, some due diligence on demand dynamics through on-chain metrics is important for more confirmation.

Spot inflows underpinned the latest price surge. For example, the privacy coin received over $21 million worth of positive netflows in the spot market on Wednesday.

However, this was lower compared to the $32 million plus in netflows observed on 5 May. ZCash open interest clocked $1.67 billion in the last 24 hours. For context, it peaked at $1.52 billion on 9 May just before it embarked on a retracement.

Elevated open interest suggests that aggressive derivatives positioning underpinned the latest rally. This could also signal heavy risk for leveraged long positions.

Speaking of, liquidations were skewed against short positions in the last 24 hours. Meanwhile, whale orderbook indicated that some profit-taking was ongoing.

In summary, Zcash (ZEC) crypto may be headed for another correction in which long liquidations may intensify the downside. However, this does not rule out more potential upside, especially under the right conditions.

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