Privacy Coins Tumble as Market Links Them to Bitcoin Cycle

The privacy coin sector has experienced a dramatic reversal of fortune, shedding 15.4% of its value according to CoinGecko data. This marks a stark contrast to the explosive, market-defying rallies that characterized the fourth quarter. Individual assets have been hit hard: Zcash (ZEC) is down 8.5% over the past 24 hours, Monero (XMR) has fallen 5.4%, and Dash (DASH) has shed 3.9%. The parallel drop with major assets like Bitcoin (BTC) reflects a significant shift in how these tokens are traded, according to analysts who spoke to Decrypt.

Slava Demchuk, CEO of AMLBot, told Decrypt that the narrative of privacy coins as a safe haven “broke in December as the market priced in reality.” He noted that for coins like Zcash and Dash, most on-chain volume remains transparent. “They trade as speculative narratives, not utility tools, causing them to drop like standard high-beta altcoins.” This new dynamic means privacy assets are now governed by the same macro forces as the rest of crypto, a view echoed by Jamie Elkaleh, CMO at Bitget Wallet.

Elkaleh pointed to the influence of institutional products like ETFs and significant capital inflows. “With the introduction of ETFs and significant capital inflows, ETF positioning and monetary policy expectations increasingly dictate crypto market direction,” he noted. “Privacy assets are behaving less like isolated hedges and more like high-beta components of the broader ecosystem.” This linkage explains their amplified decline during the current market rout.

Despite the current pullback, the core fundamental drivers for privacy technology remain potent. Historically, rallies have been fueled by a confluence of three factors, Demchuk explained. The first is technological advancement in cryptographic privacy, which continues to evolve. The second is political and regulatory pressure, such as the controversial European Union ‘chat control’ proposal and bans on anonymous accounts—a dynamic that spiked demand for coins like Zcash as recently as October.

The third driver is genuine demand from users and businesses in jurisdictions where transparent ledgers pose real-world risks. “The more pressure you apply, the more valuable the tools that give people their privacy back tend to become,” Demchuk said. However, he added that today, they trade more like a speculative extension of the Bitcoin cycle. The governance of the projects themselves can also influence sentiment, as seen when Ethereum (ETH) co-founder Vitalik Buterin recently weighed in on Zcash’s committee-based governance, warning that a shift to token voting could undermine its privacy guarantees.

Looking ahead, the path to recovery for privacy coins is now inextricably linked to the broader market, specifically Bitcoin. Both experts agree that a rebound hinges on Bitcoin finding stability. “If Bitcoin stabilizes at a higher level and risk appetite returns,” Demchuk said, these coins can “claw back recent losses. Historically, they move harder than Bitcoin.” This high-beta characteristic means they fall faster but can also rally more aggressively when sentiment improves.

Jamie Elkaleh of Bitget Wallet echoed this outlook, noting the typical flow of market liquidity. “Liquidity tends to flow outward from Bitcoin into higher-beta sectors once risk appetite returns,” he said. Privacy coins have historically outperformed during such market rotations, especially when overall crypto sentiment shifts from defensive to exploratory. This suggests that while privacy coins like ZEC, XMR, and DASH are currently caught in the downdraft, their recovery potential remains significant—but only once the foundational asset, Bitcoin, establishes a firmer footing.