Is Zcash (ZEC) A Millionaire-Maker Cryptocurrency?

The privacy coin Zcash (CRYPTO: ZEC) is thrilling investors with a blistering run, up by 496% over the last three months, prompting a familiar question: Can this be one of those rare cryptoassets that mints millionaires?

Let's dive in and figure it out.

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This coin is running, but can it go the distance?

Zcash descends from Bitcoin's codebase and uses the same proof-of-work concepts like mining and halving, in addition to having a supply that's fixed at a maximum of 21 million coins. But on top of those features, it adds optional privacy features. These features enable shielded transactions that hide the sender, receiver, and the amount being transferred. Zcash thus aims to function as a form of digital cash or as a store of value with privacy, and it is not a general-purpose smart contract platform like Ethereum or its peers.

Ideally, Zcash should act a lot like dollar bills at the store. The cashier doesn't care where your fiver has been before, and no one can follow your economic footprint by analyzing the bills in your wallet.

Today, Zcash's market cap is roughly $4.7 billion. Therefore, it's likely small enough that multibagger returns are arithmetically conceivable if adoption deepens.

One important metric for tracking that adoption is the share of its supply held in the shielded (private) pool, which has climbed into the ballpark of 25%, indicating rising use of Zcash's core feature rather than purely transparent (Bitcoin-like) transfers. In other words, more holders are using Zcash for what makes it different. But for the most part, a large majority of its users still aren't embracing the privacy features, perhaps due to the modest amount of additional friction that's required to do so to consistently remain private while transacting.

Two external constraints loom large, and they might get worse soon.

First, centralized crypto exchanges have historically not been the kindest to Zcash due to regulatory pressure that they face from listing coins that could potentially be used to mask illegal activity. The exchange OKX removed multiple privacy coins, including Zcash, in early 2024, and Binance pressured the project to accommodate an exchange-only wallet address type to avoid delisting threats. Without being able to rely on mainstream crypto exchanges as distribution venues, the coin's growth ceiling is dramatically lower than it would be otherwise.

The second problem is that regulators in the E.U. have approved an anti-money-laundering package slated to prohibit service providers from dealing with privacy coins at all starting in 2027. If implemented as described, this would materially shrink Zcash's addressable market even further there. Other jurisdictions could easily copy the move, especially if there's persistent evidence of illicit use of Zcash or privacy-oriented peers like Monero.

That combination of issues means Zcash will have a narrow path toward multiplying in value and retaining its gains in the medium term and perhaps also in the long term.

There's upside here

Assuming that Zcash were to 10x in value from here as a result of a gold rush stemming from its privacy features and its current momentum, the asset would then be a mid-cap player in crypto land -- still far below the value of Bitcoin, and without Bitcoin's strong institutional adoption or its brand.

So a 10x over the next year or so is a believable outcome for this coin, which could make some investors into millionaires if it happens, provided that they're willing to invest at least six figures of starting capital. However, that's still a prohibitively large amount of money for most people, especially with a high-risk asset like Zcash. Plus, it's unclear what catalysts would sustain and accelerate the rally from where the digital asset is now.

To 100x and make even small investors millionaires, Zcash would need to accrete hundreds of billions in value over the coming few years. That generally requires three things: a solution to a pain point that is so compelling that it persistently generates a lot of demand, abundant liquidity and near-total coverage of exchange listings, and, most of all, permissive policy in multiple major jurisdictions. Bitcoin shows all three qualities to a large degree; Zcash has one and a half at best, and the remainder looks to be moving further away over time rather than drawing closer.

So the odds of Zcash going to the moon from here are very slim, at least in the current policy environment it faces.

Zcash may be worth buying today if you have a high risk tolerance and a belief that the demand for financial privacy will structurally increase despite policy headwinds. But while it's technically possible, Zcash is probably not going to make you into a millionaire at this point, even if it could make you a fair bit wealthier.

Alex Carchidi has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool recommends Monero. The Motley Fool has a disclosure policy.