Is ZEC Breakout a Bull Trap?
Zcash (ZEC) rallied after President Donald Trump announced a two-week ceasefire with Iran, amid a broader rally in global risk markets.
Main Receptors:
A 2021-style fractal warns that the price of ZEC could drop by 40% in the coming weeks.
A long leverage of more than $50 million is sitting below the current price, leaving ZEC at risk.
The ZEC rally risks becoming a 2021-style bull trap.
The privacy coin surged more than 30% in the past 24 hours to $336.50 on Tuesday, its highest level since January. Its biggest rivals also rose, with Monero (XMR) up 3% and Dash (DASH) up 8%.
ZEC's latest resurgence is starting to look like its 2021 top-followed setup. Then, it entered a long bear cycle after rising to around $392.
During this correction, after ZEC tested the 0.238 Fibonacci retracement line around $85, it saw its reversal weaken below the declining trendline resistance.
The current setup of Zcash looks similar. The 0.236 Fib level near $197 is once again acting as strong support, while the downtrend continues to make opposite tests.
A continued rebound could lift ZEC to the 0.5 Fibonacci retracement level near $370, which would line up with descending trendline resistance.
But if bulls fail to break above the trend line, the rally may lose steam, increasing the risk of a return to the $197–$200 support zone. If so, the current move could start to look like a 2021 bull trap setup.
Related: Zcash devs raise $25M from major VCs months after ECC split
Conversely, a critical breakout above the trendline could trigger a bearish wedge breakout setup with an upside target near $1,200.
In the past, several analysts, including BitMEX co-founder Arthur Hayes and Alfractal CEO and co-founder Joao Wedson, have predicted that the price of ZEC will reach $1,000 or more.
ZEC's liquidity information increases negative risks
The Zcash Liquidity Heatmap shows further downside risk in the coming weeks.
For example, Binance's ZEC/USDT contracts could see cumulative short liquidations worth $3.81 million if the price rises above $380 in the coming weeks.
In comparison, if the price were to drop below $260, a total of about $50.56 million in long positions could be lost.
Markets tend to move into zones where more used space is concentrated. In ZEC's case, the biggest focus is placed below the current price, with long liquidity far outweighing potential short liquidity.
The heat map highlights $305–$306 as the largest single pocket of liquidity, with nearly $1.76 million in gains accumulated in that range. This makes it an important recent step to watch.
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