Record High Bearish Bets on Zcash as Price Takes a Dive

Zcash (ZEC) has seen a dramatic rise in bearish positions following a significant price drop of nearly 50% in just 24 hours. This decline was triggered by the announcement of a vulnerability in its Orchard pool, which raised concerns about the integrity of the token's supply.

Despite this sharp drop, liquidations were relatively low, with only about $118 million in forced liquidations reported. This suggests that most of the selling pressure came from spot trading rather than futures, as only around 14% of leveraged positions were liquidated. In contrast, during the same timeframe, Bitcoin experienced approximately $335 million in liquidations despite a minor price decline.

Open interest in ZEC futures reached an all-time high, indicating that many traders are opening new short positions rather than closing existing ones. This shift in market sentiment is reflected in the long/short ratios, which show a strong bearish outlook among traders. For example, Binance's retail investors had a long/short ratio of 0.77, while whale accounts were at 0.80.

Even after the recent losses, ZEC has still risen by about 490% over the past year. Analysts suggest that if selling pressure eases and prices stabilize, a short squeeze could occur, potentially leading to a rapid rebound in price.

The vulnerability was disclosed by Shielded Labs, the nonprofit behind Zcash, which revealed that the flaw could have allowed the creation of counterfeit ZEC. This issue had gone unnoticed since the pool’s introduction in May 2022 and was only identified recently. Although the flaw has been patched, concerns persist about whether it was exploited prior to the fix, leaving uncertainty regarding the total supply of ZEC. Arthur Hayes, chief investment officer of Maelstrom, stated that he sold his entire Zcash position due to these concerns.