Yesterday, the long awaited ZCash project launched and broke records as the most valuable cryptocurrency ever. The coin was added to all the largest exchanges but nobody knows how to throw a party better than Poloniex.
During price discovery the Poloniex market maker lured miners in with some astronomical orders as high as 2500 BTC per ZEC. This strategy often sets Poloniex apart from other altcoin exchanges, attracting most of the liquidity and solidifying their position as the dominant market movers.
Within the first few hours of price discovery, traders played a dangerous game of musical chairs, chasing prices that were ranging in the 100’s of BTC per ZEC. Eventually the markets crashed, likely leaving a trail of carnage for bagholders.
Right now ZEC is still trading fairly high at around 7 BTC per coin. The reason for this valuation is because demand is greater than the current supply. To prevent some miners from getting the lion’s share of early blocks, the ZCash team decided to trickle feed in coins during the first month.
As the month progresses the mining rewards will cumulatively increase until the network stabilizes at 50 BTC per block, every 10 minutes. Just like bitcoin, the mining rewards will be reduced by 50% every four years. Early investors will automatically receive 20% of the block rewards for the first four years.
The price of ZEC may continue to drop as more supply floods the markets. The smart money is staying out of these markets until the price comes down to sane levels. The only edge for ZEC may be to mine it and immediately convert them into BTC with the intent of accumulating at lower prices. ZEC Genesis Mining contracts sold out yesterday as demand soared. It may take up to six months for the price to get cheap enough for accumulation.
Prior to the launch, BitMex was trading ZEC futures which spiked up to 10 BTC each during price discovery. The main problem with these contracts is that they were sold in units of 1 ZEC, which made it impossible for them to track price discovery. BitMex was the only place where traders could short ZEC, but the price topped out at 10 BTC each, making it difficult to find an edge shorting.
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