The complete cycle of privacy coins: from the institutional era back to individual freedom in the new crypto cycle

The story of cryptocurrency is writing a new chapter. Over the past two years, institutional capital, ETF products, and regulatory compliance have taken center stage in the industry, but in the second half of 2025, the market suddenly shifted—privacy coin Zcash (ZEC) led an unexpected rally, while Bitcoin and Ethereum faced difficulties. This is not simply a rotation of speculation but a rethinking by market participants of the essence of cryptocurrencies: from being institutionalized financial tools back to the original promise—untraceable value transfer.

According to the latest data, Zcash has surged over 700% in recent months, surpassing Monero to become the leader among privacy coins. As of February 2026, ZEC is priced at $297.11, with a market cap of $4.91 billion. Meanwhile, on-chain data shows that approximately 25-30% of ZEC supply has now entered shielded pools, and over one-third of transactions involve the encrypted layer. These figures reflect a deeper market psychology shift: investors are not just trading—they are choosing a method of transaction.

The True Signal Behind Market Indicators

Price trends tell a clear story. When BTC and ETH fell to around $78.22K and $2.38K respectively, privacy coins moved upward against the trend. Monero has increased by 54% since August, while the once considered outdated Decred and Dash have risen by 145% and 337%, respectively. This inverse correlation indicates that buying behavior is not driven by optimism about the overall crypto market but by an active pursuit of privacy features.

This choice is especially significant because it occurs amid a harsh macro environment—strengthening dollar and widespread pressure on risk assets. In this context, the rise of privacy coins is not FOMO-driven speculation but a conscious shift in asset allocation. Data shows that more traders are choosing “financial defense” in a bear market—shifting capital into assets with anti-regulatory properties.

From Institutional Capital Back to Personal Tools

In the past 24 months, the crypto industry has been almost entirely dominated by institutionalization. The launch of spot ETFs, improved custody solutions, and the expansion of corporate compliance departments—all point in the same direction: cryptocurrencies are becoming part of the traditional financial system. But this process has also sparked some holders to reflect.

Zcash’s technical design embodies this philosophical return. Its privacy pools built with zero-knowledge proof technology allow users to verify transactions without revealing details. More importantly, Zashi wallets set private transfers as the default, rather than an advanced option—meaning privacy has shifted from an “expert privilege” to a “user norm.”

The revival of privacy coins directly responds to the core ideals of early cypherpunks: financial sovereignty. In an era of pervasive AI surveillance and data collection, privacy is being redefined—not as secrecy but as self-defense. This explains why institutional investors are rushing into privacy coins while individual users are actively transferring funds into encrypted pools. CoinDesk’s on-chain analysis shows that activity among small holders has increased significantly, indicating this is not a whale game but a broad behavioral shift.

From Prosecution to Exemption: The Subtle Shift in Regulatory Approach

The case of Tornado Cash adds complexity to this story. In August 2025, a New York jury found Tornado Cash co-founder Roman Storm guilty of unlicensed money transmission but failed to convict on more serious money laundering charges. In the same year, Dutch developer Alexey Pertsev was sentenced to five years in prison for similar reasons.

However, a subtle change in tone has emerged. In March 2025, the U.S. Treasury quietly removed Tornado Cash from the sanctions list—this was a key policy signal. While not a full exemption, it indicates that regulators are beginning to recognize that blanket sanctions on decentralized software applications may be neither feasible nor fair.

The key difference between Zcash and Tornado Cash lies in their architecture. The former is a full blockchain with built-in privacy options; the latter is a mixing contract designed specifically for obfuscating funds. This difference makes a comprehensive ban on Zcash more difficult to implement both technically and legally. Zcash offers an auditable transparent option, allowing users to selectively share account data—leaving room for compliance.

On-Chain Migration Reveals the Truth: Privacy Is No Longer a Marginal Choice

Abstract theories find concrete evidence in on-chain data. Zcash’s shielded pools now hold about 25-30% of the circulating supply, reaching the highest level in network history. More critically, over 30% of transactions now involve this encrypted layer—far higher than early marginal usage.

CoinDesk Research’s analysis indicates that this growth is not driven by large institutional moves but by organic adoption from multiple small accounts. This contradicts institutional preferences for transparent, auditable transactions and further confirms the personalized nature of adoption. Users are not speculating; they are expressing privacy needs through their daily choices.

In contrast, Bitcoin, while maintaining its status as digital gold, has evolved into a hedge tool for institutions. Monero was once the leading privacy coin, but now it has been surpassed by the emerging Zcash. This is not a technical issue but a market choice—users prefer assets that can provide both privacy and compliance recognition.

The Complete Cycle: Cryptocurrency Returns to Its Original Intent

The development of cryptocurrencies seems to have completed a full cycle. Bitcoin proved that unbanked value transfer is possible; Ethereum demonstrated that decentralized finance should exist; now, privacy coins are reminding the market that unmonitored transactions remain important.

From the ETF boom of 2024 to the privacy coin revival in early 2026, this shift reflects market participants’ re-examination of the fundamental question: “What is crypto?” In a world where data is widely collected and AI surveillance is pervasive, personal financial privacy is no longer an idealistic goal but a practical necessity.

While institutional investors focus on compliant custody and derivatives, individual users are quietly choosing privacy coins—perhaps the most authentic voice of the market. The performance of privacy coins since the second half of 2025 not only reshapes the market landscape but more importantly, indicates that the narrative of cryptocurrencies is shifting from “institutionalized financial innovation” back to “tools for personal financial sovereignty.” This full cycle may well be a sign that the theme for the next crypto cycle has already been set.