Privacy Coins Surge: Why Zcash & Monero Are Outperforming Bitcoin

While Bitcoin buckles under regulatory pressure, a new thesis has emerged. The market is betting that in an era of total financial surveillance, privacy isn’t just a feature—it’s the only viable hedge. This is the deep dive.

I. The Great Decoupling: A New Market Thesis Emerges

In the fourth quarter of 2025, the cryptocurrency market is bifurcating. A stark divergence has emerged, splitting the market between its transparent, institutional-grade assets and the opaque, privacy-focused protocols that were once left for dead. While Bitcoin, the industry’s bellwether, stalls, a niche sector is staging a massive, counter-cyclical rally.

This decoupling is not subtle. Bitcoin, after hitting a new all-time high of $126,000 in early October 2025, has entered a sharp correction. This downturn, dubbed “Red October,” saw the asset slide more than 20% from its peak, driven by a stronger dollar, significant profit-taking from ETF holders, and whale-led sell-offs. By early November, Bitcoin is struggling to maintain the crucial $100,000–$103,000 level.

In stark contrast, the privacy sector is exploding. Zcash (ZEC), a 2016-era fork of Bitcoin, has surged more than 700% since September 2025. The asset has climbed from roughly $360 to over $630, hitting a seven-year high as it outperforms the market. This is not an isolated event but a sector-wide re-rating. In the same period, Monero (XMR) has posted gains of over 130% on the year, and Dash (DASH) has seen a 400% year-to-date gain, including a 141% surge in a single week.

This is not the speculative, high-beta froth of a typical altcoin season. This is a strategic repricing of risk. The market is broadcasting a clear, new thesis: in an environment of unprecedented regulatory scrutiny, a transparent, publicly auditable ledger—the very feature that defined Bitcoin—is now being re-evaluated as a liability. Investors are fleeing transparent assets for opaque ones, viewing privacy as the new, “safer” hedge against state-level financial intervention.

Table 1: The Privacy Divergence (Q4 2025)

II. The “Wall Street” Debate: Pump or Prophecy?

This violent repricing has ignited one of the most critical philosophical and financial debates in the asset class’s history. This is the “Big Short” moment for privacy, and two of the market’s most respected voices are on opposite sides of the trade.

The Bear Case: Lyn Alden’s Warning

The skeptical view, articulated by economist Lyn Alden, is that this is a dangerous, liquidity-fueled trap. Alden has characterized the Zcash rally as a “coordinated token pump” [5], warning traders not to become “exit liquidity”—the retail investors left holding worthless bags after sophisticated players have cashed out [6].

This bearish thesis is grounded in tangible risks:

• Liquidity Risk: Privacy coins, particularly Monero, are notoriously illiquid. Facing a constant stream of delistings from major exchanges, their trading volumes are thin [9]. This lack of liquidity means price moves are exaggerated on the way up, and a true exit in size is nearly impossible.
• Technical Risk: Alden has previously highlighted the unique risks of “absolute privacy” protocols. Monero, for example, relies on “indirect proofs” to audit its total supply. This creates a non-zero, catastrophic tail risk of an “undetected inflation bug” that could debase the currency without anyone knowing [12].

The Bull Case: Naval Ravikant’s Prophecy

The counter-argument, articulated by tech investor and philosopher Naval Ravikant, is that this is not a pump, but a prophecy being fulfilled. His thesis is simple and profound: “transparent crypto won’t survive a government crackdown” [6].

This argument posits that Bitcoin’s greatest feature is also its Achilles’ heel. The perfectly auditable, permanent, and transparent ledger is a dream for blockchain purists but a weapon in the hands of a state-level adversary. It makes every transaction, every wallet, and every user traceable via chain analysis [6]. Even Bitcoin’s pseudonymous creator, Satoshi Nakamoto, acknowledged these privacy limitations in the original 2008 whitepaper [6].

Ravikant’s thesis is being proven in real-time. The tools built to add a privacy layer to Bitcoin, such as the CoinJoin-based Samourai and Wasabi wallets, have been systematically dismantled. In 2024, Samourai’s founders were arrested, and Wasabi discontinued its core privacy feature, proving that any attempt to bolt privacy onto a transparent system will be targeted and shut down [6].

The Synthesis: A Pump to Price a Prophecy

The reality is that both Alden and Ravikant are correct. This is a speculative, liquidity-driven pump (Alden), but it is a pump ignited by a deeply fundamental and prophetic thesis (Ravikant).

The evidence for this synthesis lies in the difference between the Zcash and Monero rallies. Monero’s gains are “subdued” [9], while Zcash’s are parabolic [5]. This is not an accident. The Zcash rally is explicitly linked to institutional speculation, not just retail use. The primary drivers are the launch of the Grayscale Zcash Trust (ZCSH) and rampant speculation of a future ZEC ETF [10].

These institutional products are only possible because of Zcash’s “optional” privacy, a feature that gives it a veneer of regulatory compliance [9]. Therefore, the “pump” that Alden correctly identifies is the mechanism by which Wall Street is placing a highly leveraged bet on Ravikant’s thesis. The market is bifurcating privacy itself: “institutional-grade, compliant privacy” (ZEC) is attracting speculative capital, while “absolute, uncompromising privacy” (XMR) is being treated as a pure, less-liquid utility asset.

III. The Philosophical Bedrock: Why This Was Always Inevitable

To understand the power of Ravikant’s thesis, one must understand its origin. This is not a new 2025 trend; it is the 30-year-old Cypherpunk mission finally finding its moment. The current privacy trade is the direct financial manifestation of a philosophy born in the mailings lists of the early 1990s.

The Cypherpunk Manifestos

This movement was chronicled in two foundational documents:

1. Timothy C. May’s “The Crypto Anarchist Manifesto” (1988/1992): This was the offensive case for privacy. May predicted the “specter of crypto anarchy” [14], arguing that strong cryptography would soon give individuals the ability to “communicate and interact…in a totally anonymous manner” [14]. He foresaw that this would “profoundly change the nature of economies” and render governments unable to “coerce folks” by making their interactions untraceable [15].
2. Eric Hughes’ “A Cypherpunk’s Manifesto” (1993): This was the defensive case. Hughes argued that “Privacy is necessary for an open society in the electronic age” [17]. His crucial distinction, which forms the entire investment thesis for Zcash, was: “Privacy is not secrecy… Privacy is the power to selectively reveal oneself to the world” [17].

The Cypherpunk mission was born from these ideas. Its core tenets were, first, a prescient anticipation of surveillance—they predicted that as the internet became integral to life, governments would inevitably try to “control, monitor, and censor it” [18]. Second, their solution was not political lobbying, but a direct call to action: “write code” [17]. They sought to build systems that guarantee privacy “with physics and mathematics, not with laws” [20]. These efforts led directly to the precursors of crypto, like David Chaum’s blind signatures and Adam Back’s Hashcash [21].

The 2025 regulatory storm—the FATF rules, the EU’s MiCA, the global war on financial anonymity—is the exact future the Cypherpunks warned about [18]. The privacy coin rally is simply the market’s delayed realization that their “code” (Monero and Zcash) is the only effective defense, just as they architected it three decades ago.

IV. A Tale of Two Ledgers: Monero (The Fortress) vs. Zcash (The Amphibian)

For an investor, understanding this trade requires analyzing the underlying technology not as computer science, but as competing business models and risk profiles. Monero and Zcash offer two fundamentally different solutions to the same problem.

Monero (XMR): The Fortress – Absolute, Mandatory Privacy

Monero’s business model is one of uncompromising, “private-by-default” digital cash. Every user is protected on every transaction, whether they want to be or not [22].

• Core Technology (The “Moat”): Monero achieves this with a multi-layered defense:
  • Ring Signatures: Hides the sender by mixing their digital signature with a group of “decoys,” making it cryptographically impossible to know which member of the “ring” actually authorized the payment [22].
  • Stealth Addresses: Hides the receiver by generating a unique, one-time address for every single transaction [24]. This breaks linkability, preventing an analyst from seeing all the payments sent to a single entity.
  • RingCT (Ring Confidential Transactions): Hides the amount. The network uses a cryptographic proof to verify that the sum of inputs equals the sum of outputs (ensuring no money was created or destroyed) without revealing the actual amounts being transacted [22].
• Market Impact (The “Risk”): This mandatory system creates the largest and most robust “anonymity set” in crypto. It is the gold standard for privacy purists. However, this uncompromising nature makes it a direct target for regulators. It has no “compliance” story. This leads directly to delistings, thin liquidity, and a “subdued” price relative to Zcash [9]. Monero has evolved into an asset for users who need absolute privacy, not speculators who need liquidity.

Zcash (ZEC): The Amphibian – Optional, “Compliant” Privacy

Zcash employs a “dual-mode” system, allowing it to act as both a transparent asset and a private one [9]. It can live in the water (anonymity) and on land (transparency).

• Core Technology (The “Switch”): Zcash’s engine is zk−SNARKs (Zero-Knowledge Succinct Non-Interactive Arguments of Knowledge). This is a cryptographic proof that allows one party to prove a statement is true (e.g., “I have enough funds, and this is not a double-spend”) without revealing any of the underlying data (sender, receiver, amount) [22].
• The Two Ledgers: Zcash users can choose between two address types:
  • Transparent (t-addresses): These function exactly like Bitcoin. All transactions are public, auditable, and traceable on the blockchain [28].
  • Shielded (z-addresses): These use zk−SNARKs to make the transaction details completely private [22].
• Market Impact (The “Opportunity”): For years, this optionality was Zcash’s great weakness. The vast majority of users defaulted to transparent t-addresses, which were computationally cheaper and easier [22]. This meant the “anonymity set” (the pool of private transactions) was small, making the privacy weak.

In 2025, this “flaw” has become its greatest strength. The t-address system allows Zcash to be listed on compliant exchanges, held by institutional custodians, and packaged into products like the Grayscale Zcash Trust [9]. An institution can buy “compliant” ZEC on a public t-address, satisfying regulators. An individual can then choose to “shield” those funds by moving them to a z-address.

Furthermore, Zcash has “view keys” [31]. This feature allows the owner of a z-address to selectively reveal their transaction history to a trusted third party, such as an auditor or regulator, without doxxing their entire financial life to the public. This perfectly fulfills Eric Hughes’ 1993 vision of “privacy as the power to selectively reveal oneself” [17]. This is the “compliant privacy” model that Wall Street can, and is, betting on.

V. The Regulatory Storm: A Pincer Movement and a Shocking Reversal

The privacy rally is not happening in a vacuum. It is a direct, logical response to a complex and contradictory global regulatory environment. This environment has created a powerful pincer movement that is inadvertently making the bullish case for privacy.

The First Pincher: The Global Crackdown (The “Stick”)

The first arm of the pincer is the coordinated global crackdown on financial anonymity.

• Europe’s MiCA: The EU’s Markets in Crypto-Assets (MiCA) regulation is no longer theoretical. Full implementation for Crypto-Asset Service Providers (CASPs) began on December 30, 2024 [32]. While providing legal certainty for assets like Bitcoin, it is a death knell for privacy. A 2024 EU bill is set to effectively ban the listing of privacy coins like Monero and Zcash on EU-based exchanges by 2027 [35].
• The FATF “Travel Rule”: The Financial Action Task Force (FATF), the global standard-setter for anti-money laundering (AML), is aggressively enforcing its “Travel Rule” [36]. This rule requires all VASPs (exchanges) to collect, verify, and share sender and recipient information for all transfers, effectively ending anonymity on centralized platforms [38].

The immediate result has been a “delisting wave.” In response to this pressure, major exchanges like Binance and Kraken have either delisted or restricted services for Monero, Zcash, and others in key European jurisdictions [10]. This action, intended to kill privacy coins, is instead removing the “off-ramps” and forcing users who value privacy to seek non-custodial, truly decentralized solutions.

The Second Pincher: The U.S. Policy Reversal (The “Carrot”?)

Just as the world seemed unified against privacy, the second arm of the pincer emerged: the U.S. blinked.

• The Tornado Cash Delisting (March 2025): In a stunning reversal, the U.S. Department of the Treasury announced it was removing the Ethereum-based mixing service Tornado Cash from its sanctions list [40]. The official reasoning was vague, citing a review of “novel legal and policy issues” [40], which the market interpreted as an admission that sanctioning open-source code was legally and technically untenable.
• The Roman Storm Trial (August 2025): This was followed by the mixed verdict in the criminal case against Tornado Cash co-founder Roman Storm. While the jury convicted him on the lesser charge of operating an unlicensed money transmitting business, they were deadlocked on the two most serious charges: conspiracy to commit money laundering and conspiracy to commit sanctions violations [42].

The Synthesis: The “Smart Money” Decodes the Contradiction

The market has interpreted this regulatory chaos in a very specific and bullish way.

1. Europe’s (MiCA/FATF) crackdown is a demand signal. It confirms that the state is coming for transparent assets and is weaponizing the financial system. This creates a “Streisand Effect,” pushing savvy investors to find an exit before the gates close [10]. It answers the question, “Why do I need privacy?”
2. The U.S. (Tornado Cash) reversal is a resilience signal. It demonstrates that the world’s most powerful regulator failed to kill a piece of decentralized code [43]. It proved that the state’s legal case against the code itself is weak [42]. It answers the question, “Will this privacy tool even work when I need it?”

When you combine a massive new demand for privacy (driven by the EU) with a new confidence in the resilience of privacy tools (driven by the U.S.), you get an explosive, parabolic rally. The market is betting that privacy protocols are the one asset class that is both necessary (due to the crackdown) and un-seizable (due to the tech).

VI. Ricky’s Playbook: Projections & Practical Sovereignty

This final section synthesizes the analysis into a forward-looking thesis and scannable, practical advice.

A. Future Projections: The Great “Feature-ization” of Privacy

The long-term game is not “privacy coins” as a separate, speculative asset class. It is the “feature-ization” of privacy. The technologies incubated by Monero (ring signatures) and Zcash (zk−SNARKs) are being integrated into the entire Web3 stack.

Zero-Knowledge proofs, Zcash’s engine, are the key. They are the only known technology that can solve Web3’s two biggest problems simultaneously: Scaling (via ZK-Rollups, which bundle transactions) and Privacy [29].

• Zcash (ZEC) Outlook: The 2026 price targets for ZEC are wildly divergent, reflecting the binary nature of this regulatory bet. Pessimistic models place it around $260 [46], while optimistic models, factoring in sustained institutional interest, see it in the $550–$680 range [8]. The ZEC price is now a proxy for the “institutional-compliant” privacy narrative. Its future is tied directly to the ZEC ETF speculation [10] and its ability to maintain its “amphibian” balance of being both compliant and private [48].
• Monero (XMR) Outlook: Monero’s price is less relevant. Its utility as untraceable digital cash is its primary metric. Its future is as the “digital Swiss bank account” of Web3—difficult to access, highly illiquid, but the ultimate standard for those who truly need it.

B. Practical Advice: How to Hold Anonymously – Acquisition

The golden rule of privacy is sovereignty. This begins with getting assets off centralized, KYC-compliant exchanges and into a non-custodial wallet where only the user controls the private keys [49]. An asset’s privacy is meaningless if it has a public, KYC-linked purchase history.

1. Step 1: Anonymous Acquisition (The “Airing Gap”)
   • Method 1: P2P Exchanges: Use decentralized, no-KYC platforms like Bisq or LocalCoinSwap. These platforms facilitate peer-to-peer trades, often using cash, bank transfers, or other methods that are not centrally logged [51].
   • Method 2: Privacy Swaps: For those less comfortable with P2P, the “airing gap” method is effective. Buy a transparent asset like Bitcoin or Ethereum from a regular exchange [52]. Send it to a non-custodial wallet. Then, use a decentralized exchange (DEX) or a cross-chain swap service to trade that BTC/ETH for Monero (XMR) [50]. The Monero transaction will cryptographically break the on-chain link.
   • Method 3: Cash: Use a Bitcoin ATM (which often have low-to-no KYC requirements for small amounts) or a local meetup to acquire crypto with physical cash [51].

C. Practical Advice: How to Hold Anonymously – Wallet Setup

• For Zcash (The “Compliant” Hedge):
  • Wallet: Zashi Wallet. This is the official, mobile-first, shielded-by-default wallet from Electric Coin Company, the creators of Zcash [53].
  • The Process (Tutorial):
    1. Download Zashi from the official iOS or Android app store.
    2. Securely back up the 24-word seed phrase.
    3. Fund the wallet. This can be done by sending ZEC from an exchange or by using the in-app Coinbase integration to purchase ZEC directly [53].
    4. THIS IS THE MOST IMPORTANT STEP: When the ZEC arrives, it will likely be in a public ‘t-address’. In the Zashi wallet, there will be a “Shield” button.
    5. The user must press “Shield.” This action will create a transaction that sends the ZEC from the public t-address to a private ‘z-address’ [28]. This computation of the zk−SNARK proof may take a moment.
    6. Once shielded, the balance is private, and all future transactions sent from this shielded pool will be private by default.
• For Monero (The “Absolute” Hedge):
  • Wallet: Cake Wallet for mobile or the Monero Official GUI for desktop.
  • The Process (Tutorial):
    1. Download Cake Wallet or the Monero GUI from their official websites.
    2. Securely back up the 25-word mnemonic seed.
    3. Fund the wallet by sending XMR to the public address.
    4. You are done. With Monero, there is no “shielding” step. Privacy is mandatory and automatic [22]. The sender, receiver, and amount of every transaction are already obscured by default [27].

D. Concluding Thesis

The 2025 privacy rally is not a speculative anomaly. It is the market’s logical and inevitable response to a global financial system that has weaponized transparency.

Regulators, in their quest for total control, have inadvertently created the perfect bullish setup. The MiCA/FATF crackdown is the “stick” that creates the demand for a financial exit, while the U.S. government’s failure to kill Tornado Cash provides the “proof of resilience” that makes privacy-tech a viable asset.

Zcash and Monero represent two different answers to this new reality. Zcash is the institutional-friendly “amphibian,” a leveraged bet on compliant, optional privacy. Monero is the purist’s “fortress,” a utility-driven asset for absolute, uncompromising sovereignty.

A sophisticated investor in 2025 must understand both. The privacy trade is no longer a fringe, philosophical debate. It is about financing the future of a free and open internet. The Cypherpunks wrote the code; Wall Street is just now figuring out how to price it.