Zcash [ZEC] is rallying as bearish pressure eases, with Garrett Jin, a renowned trader, exiting his 38,000 ZEC short position after three months, at a loss of approximately $36 million.
Jin initially entered this trade when ZEC was trading at approximately $656 and exited it when ZEC reached a high point of $1,530, resulting in his trade being significantly underwater.
Additionally, Jin’s move will create additional demand to purchase ZEC, contributing to the rally’s continued momentum.
ZEC leverage surges after short squeeze
The relatively quick unwind of the short squeeze has removed significant bearish momentum from ZEC’s position. However, the derivatives markets for ZEC have rapidly built up extreme levels of leverage following that short squeeze.
Open Interest (OI) rose to approximately $3.3 billion around the 19th of September before dropping back down to $2.9 billion. However, this still represents extremely high levels of positioning.
Meanwhile, the liquidation heatmap shows heavy liquidation clusters concentrated at the $1,550 level and around the $1,580 level.
These represent areas where large groups of investors may be squeezed out as they attempt to cover their losses should buyers once again take control.
Below the current price near $1,480, additional liquidity concentrates around $1,450 and $1,420, creating downside liquidation pockets.
This structure leaves ZEC surrounded by leveraged positions on both sides. A sudden large movement in either direction would likely result in cascading liquidations rather than a trending movement.
Still, the increase in OI indicates that investors have been replacing the previously closed-out short positions, continuing to raise the risk associated with volatility.
ZEC gains institutional demand
ZEC’s demand has expanded well past the influence that was primarily behind ZEC’s recent spike in derivatives.
Since the launch of Grayscale’s ZEC Trust (ZCSH) on the 25th of August, ZCSH has accumulated over $270 million. This gives investors a regulated route to gain ZEC exposure.
The fund’s assets have reached over $900 million. The consistent flow of investment capital into the trust will create spot-linked demand for ZEC that will not require traders to add additional leverage to invest.
More importantly, it may help counter the unwind of derivatives that occurs when OI returns back to pre-peak levels in September. ZCSH has traded over $11 billion and, therefore, has increased overall market visibility.
Final Summary
- Garrett Jin’s $36 million ZEC short exit removes bearish pressure, but high leverage keeps the rally vulnerable.
- ZEC gains institutional demand as ZCSH inflows strengthen spot-driven support.
