Privacy Coin Sell-off
PowerKee’s Bastion of Privacy #7
This week was quite exciting for those of us in the crypto space. Bitcoin broke through $40,000 before settling around $39,000 at the time of writing. Ethereum recorded a wild rally, breaching $1,200 for the first time since 2018. We have also seen some nascent signs of an altcoin season.
The same can’t be said about the privacy coins, unfortunately. They sold off heavily on the back of further regulatory scrutiny. After we initially covered this topic several weeks ago, another wave of delistings has hit the space. In the latest “Bastion of Privacy”, we will look at the impact of these developments on the price action in top privacy coins.
While the current situation appears rather grim, we believe there are many reasons to be optimistic. In fact, institutional migration onto the public blockchain rails might be the saving grace for the privacy coins.
Bittrex Delisting Triggers a Sell-Off
On January 1st, Bittrex announced that Zcash, Monero, and Dash would be removed from its platform on January 15th. This follows a similar move by ShapeShift in early November of 2020. According to the CoinMarketCap ranking of exchanges, Bittrex 24hr trading volume is about $170 million — much more significant than ShapeShift.
Privacy coins sold off sharply in response to the Bittrex announcement. At one point, Monero (XMR) was down nearly 23% on the day of the announcement before staging a late recovery and closing down 13% on the day.
Zcash (ZEC) and Dash experienced double-digit declines, although both fared better than XMR. On the day of the announcement, ZEC declined by roughly 18% before staging a comeback a few days later, and Dash fell by nearly 17%.
While ZEC recovered some of its losses, XMR and Dash are still down significantly. These declines might not look too bad in absolute terms, but the numbers are much worse relative to the broader market and Ethereum, in particular.
Despite the regulatory crackdown and the delistings, privacy coins still have a meaningful role to play in the cryptocurrency ecosystem. In his final post of 2020, Vitalik Buterin said that we, as a society, are “increasingly moving toward anonymized reputation systems with zero knowledge proofs.” This extends to all areas of our life, from financial transactions to personal identification data. We believe that the need for privacy-preserving coins will become more apparent in 2021.
Moreover, we previously covered the increasingly authoritarian stance of governments and large corporations in previous releases. Regulations opposing encryption, self-custody wallets, and outlawing privacy coins are some examples of developments from governments. The delistings are undoubtedly linked to the increasingly hostile stance from government authorities.
However, as the stance becomes more hostile, the importance of the networks increase. The underlying network of privacy coins are agnostic to regulatory developments and will continue to function. If governments continue to infringe on the privacy rights of netizens, we will be increasingly forced to consider alternative ways of communicating and transferring value.
Positive Outlook Despite the Regulatory Uncertainty
The recent sell-off in the privacy coins, amid a broad rise in cryptocurrency prices, is certainly reflective of exchanges being forced to delist these coins. Nonetheless, there remains an overwhelming need for privacy solutions and we foresee this becoming more apparent in 2021.
Our listing will occur during January, the reason for the delay is our extended security audit which is currently happening. Our node will work in PoW initially. Staking will be turned off, then after several hundred blocks a PoS will be activated and we will add the master nodes. This is a change from our initial concept to make the network guaranteed stable and well performing once listed and operating live. Security is always our priority. Stay tuned, we’ll list with a lot of buzz. We have a major marketing campaign aligned before the listing.