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Zcash (ZEC) has dropped by nearly 6% in the past 7 days following a massive rally that pushed the token to its highest levels in a decade.

Trading volumes remain quite high at $1.4 billion, accounting for over 7% of the asset's circulating market cap.

The price hit a strong sell wall at $1,300 as macroeconomic conditions in the United States deteriorated.

A stable inflation print on Friday kickstarted a short-lived rally across crypto assets but quickly faded, as odds of a rate hike during the next FOMC meeting rose to nearly 90%.

The Federal Open Market Committee (FOMC) is expected to convene on September 16. Comments from the new Chairman of the central bank, Kevin Warsh, will be scrutinized to get a sense of how the institution plans to curb inflation.

This indicator is nearly doubling the Fed's 2% target at the time, causing concern among Governors that things could get out of hand. In contrast, the White House is pushing for an interest rate cut, even though that could result in higher inflation in the near term.

The crypto market remains highly volatile and susceptible to changes in the macro backdrop. However, Zcash has managed to outpace most of its peers this year with a 112% gain in 2026.

Its privacy feature and clear use case seem to be what's driving strong interest in this token. The Zcash blockchain has successfully navigated the recent turmoil caused by an exploit found in a recent audit that allowed anyone in the know to mint an unlimited amount of ZEC tokens.

However, the Zcash community quickly launched a new vault called Ironwood that strengthened the network's supporting code. Millions of ZEC tokens have already been migrated from its predecessor vault, Orchard, reflecting the users' trust in this privacy-focused blockchain and its developing team.

Shielded Transactions (as a %) – Source: ZecHub

Moreover, on-chain data from ZecHub indicates shielded transactions have jumped to their highest levels in nearly two years, accounting for 56% of all transactions made within this blockchain. This indicates high usage and strong adoption of the network's core privacy feature.

Turning to the daily chart, we can see that a bearish divergence has already emerged in the Relative Strength Index (RSI), indicating that positive momentum is weakening.

This is a technical signal that shows up when the price of an asset rises, but the RSI makes a lower high. This is common in late-stage bullish price movements and tends to anticipate a strong correction.

We believe that Zcash should retreat to the $850 area shortly, as liquidity at these high levels has dried up, primarily as a result of a challenging macroeconomic backdrop.

It is highly likely that traders will hedge their long positions by either cashing out of their trades ahead of the Fed's meeting or buying put options — which tends to increase the selling pressure.

We don't see the rally ending at this point, as Zcash's long-term target, following an ascending triangle breakout, is still quite high at $2,500. Hence, a drop to $850 could open up the door for some late buyers who would like to position themselves for the continuation of the current uptrend.

This article was originally posted on FX Empire

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