Is Zcash’s (ZEC) Explosive Rally Running Out of Steam?

Zcash (ZEC) has rallied by over 1,500% in the last two months, but new onchain data indicate that the market is entering “overheating” territory, which may lead to a drastic correction cycle.

ZEC’s “Overheating” Signal Warns About 2021-Like Selloff

Zcash’s recent surge has triggered the largest red bubble on record, a clear indication that the market is entering an “overheating” phase, according to CryptoQuant’s Spot Volume Bubble Map.

The indicator, which visualizes spot trading activity across major exchanges, shows that ZEC’s volume and momentum have reached historically elevated levels, often associated with speculative excess.

In previous cycles, similar overheating signals have appeared shortly before major local tops, marking the end of aggressive uptrends. For instance, in 2021, a similar signal preceded an 80% crash within a year.

This surge in trading volume suggests that short-term traders may be dominating the market, increasing the probability of a volatility spike or profit-taking-driven correction in the coming weeks.

ZEC Corrects From Most Overbought Levels

Last week, ZEC’s weekly relative strength index (RSI) surged to 94.24, its highest level in history. Since then, the price has corrected by more than 35%.

Similar overbought levels in past cycles have been followed by steep drawdowns between 45% and 90%, often resetting the market toward its 20-week exponential moving average (EMA), now near $230.

Popular trader Altcoin Sherpa echoed this caution, describing ZEC’s price action as a slow “stairs up” move that “usually has a violent end.” Others, including Edward Morra and DarkSide, anticipate a pullback toward $500 before a sustainable recovery can occur.

What Could Change The Bearish View?

On the daily chart, ZEC remains above its 20-period EMA (the green wave) at around $440. This wave has capped Zcash’s downside attempts during its bull run in the past months.

A rebound from this zone could reignite short-term bullish momentum toward the upper range of the pattern—roughly $900 to $1,000—aligning with Arthur Hayes’ short-term projection.

However, if the EMA breaks, the “overheating” narrative could quickly evolve into a full-fledged correction phase, sending the price toward $311, a level aligning with the 50-period EMA (the red wave).