Privacy Protection or FOMO: What’s Driving the Surge in Anonymous Cryptocurrencies?

For the crypto industry, October will be remembered not only for the largest derivatives liquidation in history. The month kicked off with Grayscale announcing the launch of a private placement for accredited investors in its Zcash Trust — a move that was quickly followed by a sharp rally in the price of ZEC.  

The price of Zcash doubled within the first few days of October. The upward momentum also spread to other assets such as Dash and Monero, though to a lesser extent.

Then, on October 9, Ethereum developers released the roadmap for Kohaku — a tool designed to enhance wallet privacy and security as part of the new Privacy Cluster initiative. Notably, the document highlighted the Railgun project, whose token quadrupled in value immediately after the announcement. 

At the same time, the Solana network hosted a token sale for the Umbra project, which attracted over 10,000 early applications totaling $155 million — far exceeding its $3 million target. The outcome highlights exceptionally strong investor interest. Like Railgun, Umbra aims to enhance transaction privacy, but it operates within a different ecosystem and relies on its own set of privacy-focused techniques.

Also drawing attention is the Aztec network, which is currently under development and features a hybrid architecture capable of supporting both transparent and shielded transactions. 

Notably, the team secured its first investments back in 2021, and by 2025 the project had entered a test-phase rollout. Despite the unfavorable regulatory climate, the steady pace of development even at that stage underscored the strong potential of privacy-preserving technologies for users. 

Among the less obvious factors is the rising popularity of the derivatives platform Aster, which, among other features, supports hidden orders — an indirect sign that privacy is gaining traction within the DeFi sector. 

Additionally, the HumidiFi protocol on Solana has shown a notable increase in trading volumes. It operates using so-called dark pools, and its surge in activity likewise occurred against the backdrop of the ZEC rally.

This trend indicates that the privacy narrative is spreading across multiple ecosystems simultaneously. But why are users starting to pay attention to it right now?

Anonymous cryptocurrencies are drawing renewed attention amid events outside the crypto industry that have raised concerns about privacy protection in both the digital and financial spheres.

One of the most notable incidents likely came on October 10, when Pavel Durov, the founder of Telegram, voiced his concern over user privacy, highlighting the increasing control governments around the world are exerting over the digital space.

In addition, during September and October, criticism intensified over the EU’s proposed legislation on monitoring users’ private messages — the so-called “chat control”. Some perceive this initiative as an attempt by authorities to implement mass surveillance, potentially infringing on fundamental human rights protected under European law. 

European intelligence agencies have also claimed that anonymous cryptocurrencies are being used to finance subversive activities by Russia. In May 2025, the EU Parliament updated the MiCA regulations to ensure a complete ban on this class of assets by 2027. 

Adding to this, the UK introduced mandatory age verification for Discord users, and OpenAI announced an age-check requirement in ChatGPT for access to certain platform products. 

All of this unfolds against a backdrop of numerous initiatives to launch central bank digital currencies (CBDCs), which pose additional risks to citizens’ financial privacy.

Arguably, even more consequential events for the crypto industry took place in the United States. Although no outright ban on anonymous cryptocurrencies has been imposed, the Tornado Cash shutdown and the criminal case against its founder set a risky precedent for the DeFi sector. 

After Donald Trump’s election victory, the sanctions on Tornado Cash were lifted. However, in September, the U.S. Securities and Exchange Commission (SEC) released a proposal to regulate DeFi platforms, signaling tighter oversight ahead. 

On one hand, the proposal aims to eliminate risks and uncertainty for developers while keeping backend code outside regulatory oversight. On the other, it requires implementing access controls at the protocol interface level and sharing user information upon government request.

Shortly after, the SEC held a roundtable focused on financial oversight and privacy. The regulator is seeking a compromise that could allow anonymous projects to operate within the legal framework. In practice, however, the proposal effectively places fully confidential and decentralized protocols outside the law, as their teams would be unable to meet the imposed requirements. 

In this context, the surge of interest in specific privacy-focused assets makes perfect sense. Since Zcash, Railgun, and Aztec technically allow for selective data disclosure, they are potentially compliant under U.S. regulations. If this assumption holds, these are the types of projects most likely to gain widespread adoption in the long term.

That said, controlling crypto flows doesn’t rely solely on legal mechanisms. Alongside actions by Grayscale, one of the key drivers of the ZEC rally is attributed to a post by Naval Ravikant, founder of AngelList. In it, he refers to Zcash as a “hedge” against Bitcoin, likely pointing to emerging privacy risks for Bitcoin holders.

The investor was referring to Bitcoin’s full transparency, which allows platforms like Arkham or Chainalysis, as well as government authorities, to track transactions and identify users. 

However, the comment may also allude to the institutionalization of the first cryptocurrency. Exchange-traded funds and corporate treasuries, such as Strategy, provide convenient tools for traditional investors — but these instruments are fully regulated and closely monitored. 

It’s also worth noting that, at the time of writing, over 40% of Ethereum validators are not processing transactions from addresses listed on the OFAC sanctions list — even as the Ethereum Foundation continues to support Tornado Cash founder Roman Storm. 

Prominent figures in the crypto community have also voiced support for privacy, including Balaji Srinivasan, author of The Network State; Chris Burniske, partner at Placeholder; Mert Mumtaz, founder of Helius; and Bitcoin developer Jameson Lopp. 

However, some of these individuals have potential conflicts of interest. For example, Naval Ravikant, whose post likely influenced ZEC’s price movement, is reported to have invested in the project at an early stage and served on the board of the Zcash Foundation. Additionally, the venture fund Placeholder, associated with Burniske, has also invested in Zcash. 

Overall, the rise of the privacy narrative has been fueled by social sentiment shaped both by influential figures and government initiatives.

Yet this social context is hardly new. Privacy threats and tightening control over financial flows have been looming over citizens in many countries for quite some time. Not to mention that most centralized crypto companies — including exchanges and launchpads — have long been sharing user data with tax authorities and law enforcement in certain jurisdictions. 

Against this backdrop, it makes sense to also consider alternative explanations for the recent surge in interest toward anonymous cryptocurrencies.

An alternative explanation for the rise of anonymous cryptocurrencies is simply capital redistribution by investors. This view is shared by Cryptorank and Sean Young, senior analyst at MEXC Research. 

The theory is based on a cyclical perception of the crypto market, where money flows from large-cap assets into smaller altcoins. In particular, the Zcash rally was preceded  by September’s euphoria and expectations of an altseason, fueled by the U.S. easing its monetary policy. 

Considering the events of “Black Saturday” on October 11, it’s unlikely that a full-fledged altseason was underway at the time of writing. However, this does not rule out capital rotation into specific segments amid a favorable news environment. In this context, anonymous cryptocurrencies emerged as one of the few market sectors showing resilient growth despite the widespread sell-off. 

Additionally, the privacy sector is characterized by relatively low market capitalization. Before Grayscale’s announcement, the key assets in the sector were collectively valued at around $8 billion, rising to approximately $12 billion at the time of writing. For comparison, the market capitalization of Dogecoin alone stands at $30 billion. 

Из-за этого даже небольшие инвестиции сразу отражаются на котировках, создавая эффект Because of this, even relatively small investments immediately impact prices, creating a FOMO effect. The subsequent rise of other assets in the sector suggests that a sense of missed opportunities drove investors to buy instruments that could potentially follow ZEC’s trajectory.

Notably, Zcash does not directly address the privacy concerns behind social tensions such as chat control or stricter DeFi regulations. Its demand can only be understood within the framework of the U.S. regulatory proposals mentioned earlier.

There is also a third — simpler — explanation, based on the interconnectedness of assets.

Historically, anonymous cryptocurrencies such as Monero and Zcash have shown strong price growth during periods when the market approached the peak of a cycle. Over time, however, the price momentum of these assets has noticeably weakened.

The surge is also likely linked to the fact that these coins are often marketed as an “enhanced version” of Bitcoin and are seen by some investors as a riskier beta bet on the original cryptocurrency. This is indirectly supported by the relatively high correlation between these assets, as well as their similar volatility patterns. 

In other words, privacy-focused assets may rise simply by moving in tandem with Bitcoin. A prime example of this correlation is Railgun.

However, it’s worth noting that during this cycle, Zcash and Dash mostly traded sideways and underperformed compared to XMR or RAIL. The October price rally of Zcash and Dash, occurring amid a broad market downturn, appears unusual and disrupts the established balance of forces within this market segment.

In summary, there are three main explanations for the rising popularity of anonymous cryptocurrencies among market participants:

• The first attributes the surge to growing interest in privacy-focused assets as a response to tightening government oversight in the EU and attempts to regulate private assets in the U.S.
• The second suggests that the Zcash rally — and the sector’s performance overall — is driven by capital rotation typical of the later stages of the market cycle.
• The third sees it as a natural price movement of assets simply following Bitcoin’s trajectory.

Which of these explanations proves correct will shape the sector’s future development. If the growth is indeed organic, it should prove more resilient than previous peaks, as privacy concerns are likely to remain relevant in the foreseeable future.

If, however, this is merely capital rotation aimed at capturing short-term gains through riskier bets, the rally will end as soon as major holders decide to take profits and move on to the next narrative.

Meanwhile, the correlation model suggests that growth in the privacy sector will conclude with the end of the current cycle and a drop in Bitcoin prices. That said, some experts question the relevance of this market model or point to the possibility that the duration of the current uptrend could change.