Messari: Canopy upgrade matters more for Zcash than the forthcoming halving

On 18 November 2020, the privacy-focused cryptocurrency Zcash (ZEC) will undergo its first halving. Messari analyst Ryan Watkins says that, with a drop in trading volume, the Canopy upgrade could matter more for the coin’s price.

On November 18, Zcash will undergo its first halving which will drop its inflation rate from 25% to 12.5%.

But will it matter?

And where does Zcash fit into the crypto monetary stores of value anyways?

1/ pic.twitter.com/d3IRni0fho

— Ryan Watkins (@RyanWatkins_) November 9, 2020

The researcher noted that after the launch in 2016, when ZEC by trading volume overtook Bitcoin, the price of the cryptocurrency has repeatedly declined to the present day.

Watkins links this downward pressure to miners’ actions in the face of extremely high inflation in Zcash’s early years. To date, the inflation rate has fallen to 25%. Almost three years ago it was four times higher, and initially it stood at 721.8%.

Beyond general educational issues around Zcash, some Zcash observers suspect ZEC’s downward price action has been attributable to miners selling their newly mined ZEC.

Zcash’s annual inflation has been extremely high in its early years. pic.twitter.com/ZEhq7NbQqR

— Ryan Watkins (@RyanWatkins_) November 9, 2020

The analyst believes that among Zcash users there is a strong belief that after the halving, which will occur at block #1,046,400 around November 18, and the corresponding reduction of inflation to 12.5%, selling pressure will ease.

Watkins considers these expectations overstated. In his view, miners account for less than 5% of daily trading volume, and this is not the factor that curbs the cryptocurrency’s price growth.

Assuming miners sell all their ZEC as they mine it, they still have only historically made up less than 5% of ZEC daily trading volumes over the past year.

The measure isn’t perfect, but its a good enough proxy to show that miners may not be what’s holding ZEC back. pic.twitter.com/rjewwJdQUI

— Ryan Watkins (@RyanWatkins_) November 9, 2020

The expert contends that the notion that halving would make ZEC more resilient in monetary terms does not stand up to criticism. In his view, cryptocurrencies with capped supply, like Bitcoin and Zcash, are interesting precisely because of this property, not because they halve miners’ rewards every four years.

Fixed supply cryptocurrencies like Zcash and Bitcoin aren’t interesting because their issuance rate halves every four years, they’re interesting because their issuance schedule is predictable and deterministic.

— Ryan Watkins (@RyanWatkins_) November 9, 2020

Watkins regards the Canopy upgrade as more important. It will launch the Network Development Fund and increase the security of the privacy-focused cryptocurrency. He estimates that, at the current price trajectory, up to $70 million could accrue to the fund over the next four years.

What then does matter for Zcash this month?

In my latest I cover Zcash’s upcoming Canopy upgrade, Zcash’s roadmap beyond 2020, and commentary on monetary maximalism.https://t.co/JLuSqdoPpW

— Ryan Watkins (@RyanWatkins_) November 9, 2020

“The days of high inflation and disputes over the developer fund are behind us. That likely means the worst for Zcash is behind us,” noted the analyst.

Watkins noted that another upgrade lies ahead for the cryptocurrency — Halo. With the new cryptographic system, the Zcash network will improve security and scalability. Improvements are anticipated regarding Ethereum compatibility with support for a privacy-enabled analogue of the ERC-20 standard.

As a reminder, in October ForkLog published an exclusive interview with Zcash founder and CEO of Electric Coin Company Zooko Wilcox.

What is Zcash (ZEC)?

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