After a Short-Term Surge, Bearish Bets Prevail?...Zcash, an Overheating Bomb After All

▲ Zcash (ZEC) / AI-generated image

Zcash (ZEC) is facing short-term overheating pressure, continuing its corrective trend after a sharp rise this week. With derivative indicators, on-chain data, and momentum indicators simultaneously showing bearish signals, the recent uptrend is likely to enter a short-term consolidation phase.

FXStreet reported on May 22 (local time) that Zcash's price is extending its correction after a significant surge this week. According to the article, Zcash showed potential for a short-term cool-down or reversal due to a combination of weakening derivative indicators, declining on-chain interest, and bearish divergence in momentum indicators.

In the derivatives market, investors' caution was confirmed. According to CoinGlass, the Zcash long/short ratio was recorded at 0.89 on Friday. A ratio below 1 indicates that market participants are betting more on a price decline. Funding rates also turned negative on Tuesday and fell further to -0.024% by Friday. FXStreet stated that in the past, Zcash prices have plummeted when funding rates turned negative and showed a downward trend.

On-chain data also pointed to a decrease in market interest. Santiment's Zcash Social Dominance metric plummeted to 0.197% on Friday. This indicator measures the proportion of Zcash discussions in cryptocurrency-related media. FXStreet explained that this indicator has returned to levels seen before this week's price rally, which is a sign that Zcash investors' interest and sentiment have weakened.

Short-term pressure also increased in technical trends. Zcash surged more than 17% on Wednesday, reaching a year-to-date high and a price level not seen since November 21 last year. This high point was close to a major upper supply zone around $699, which was presented as a potential resistance level. While the price remained above key exponential moving averages, maintaining a larger uptrend, the Relative Strength Index (RSI) and Awesome Oscillator failed to create higher highs than the peak on May 9.

FXStreet described this trend as a bearish divergence. When the price forms a new high but momentum indicators fail to follow, it implies that the rally is overheated and a short-term correction may be necessary. Furthermore, the appearance of a shooting star candle pattern on Thursday was assessed as strengthening the bearish reversal signal. If Zcash continues its retracement, the decline could extend to the horizontal support level around $530, but if it closes above the $699 resistance zone on a daily basis, the bearish scenario would be invalidated, and it could continue to rise to the next psychological zone around $750.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*