Down 11% in 1 Day, is Zcash Still a Buy?

On Jan. 8, Zcash (CRYPTO: ZEC) slid by about 11% over 24 hours due to reports that its core developer team resigned amid a governance dispute, with the intent of forming a new organization. Its price fell more on the following days. Now, the future of one of 2025's hottest privacy coins is quite a bit less clear than before, and it's natural for investors to ask if it's still worth buying, or whether this event marks the coming end for the coin.

So is Zcash still worth buying? In a word, yes, but it might be wise to wait for the dust to settle, so let's examine the state of play right now.

Image source: Getty Images.

A blockchain can easily survive a breakup

The basic facts so far are that the team behind Electric Coin Company (ECC), which is the company that comprised Zcash's original group of developers, said that they were leaving ECC in unison due to their dislike of actions of multiple individuals associated with Bootstrap, a nonprofit organization tied into Zcash's governance process.

The precise nature of the dispute is unclear, but it appears to relate to a change in the terms of employment for the developers. Nonetheless, the departing group has already resolved to form a new business to continue their work, with the goal of developing a new wallet for Zcash.

The first factor to understand here is that Zcash is open source software. Therefore, whatever governance or personal or organizational issues that led to the core developer team leaving do not imply that the coin is ruined or otherwise dead in the water. The same team can (and almost certainly will, based on their statements so far) just pick up their work under a new banner and continue onward as before, and other teams or individuals can still contribute to Zcash's codebase to ensure that it continues to gain features and perform more effectively over time.

Furthermore, none of this hubbub changes what Zcash is trying to be. It's still a privacy coin built around implementing a special type of cryptographic proofs called zk-SNARKs, which let a person prove that something like a transaction amount is valid without revealing the underlying details of who is executing the transaction or who is receiving the coins being transferred. In other words, Zcash will continue to enable people to transact without broadcasting the sender, recipient, and amounts to the whole internet, like what happens when transferring Bitcoin or many other cryptocurrencies.

So, although the developer team leaving is indeed a bump in the road because of the disruption to Zcash's development process that it implies, it's far from an insurmountable or fatal one. The coin still has real value, and it's still in active use for its intended purpose among its many thousands of holders.

It might be wise to hold back on buying for a bit

Another key element of Zcash that isn't changed by the developers' departure is its supply policy, which is the same as Bitcoin's.

Zcash shares Bitcoin's hard supply cap of 21 million coins, and its issuance follows a halving schedule that makes mining it harder and harder over time. Assuming that investors keep buying Zcash for the sake of having private transactions, they will face a tighter and tighter supply situation over time, forcing them to bid higher for each coin they want to buy, just as with Bitcoin.

But it's undeniable that the bear case has strengthened a bit. Internal disputes that cause public rifts are never good when they're happening with an asset you own. And as probable as it is that the developers will reorganize into a new structure and proceed to continue adding value to the chain, there is now an uncomfortable possibility of a prolonged public spat, not to mention the far more likely potential for a slowdown in development activity as the new organization forms and gets up and running.

So for most investors, it's a good idea to wait for the full story to come out (and also waiting to digest what the implications of it are) before considering buying more Zcash.

Don't sell what you have, and if you own a lot, try not to lose any sleep here. The coin's core investment thesis, which is that investors will consistently seek privacy for their crypto capital, is still as strong as ever. The point is that there could be more disruption ahead. And as the disruption specifically relates to the two critical pillars of governance and tech development, a good outcome for holders is not guaranteed, and especially not in the immediate future.

For what it's worth, I probably won't be abiding by my own advice here, as my risk tolerance is on the high side, and also because I have faith in the commitment of the Zcash developer team despite the recent tiff. Just be aware that if you decide to follow my lead, the chances of Zcash being an uncomfortable hold for a while are fairly high.

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