Zcash’s U.S.-listed spot ETF, ZCSH, recorded $93.56 million in net outflows during the week ending Oct. 2 as ZEC pulled back sharply after its strong September rally.
This was the first weekly net outflow for Grayscale’s ZCSH since late August. According to SoSoValue data, the fund’s total net assets fell to about $751 million, although cumulative net inflows remained positive at around $212.56 million.
Withdrawals increased toward the end of September. ZCSH saw $30.25 million in net outflows on Sept. 30 and another $26.93 million on Oct. 2. Together with withdrawals on other trading days, the weekly total reached $93.56 million.
The outflows came after a strong period of demand for the ETF. Grayscale converted its existing Zcash Trust into ZCSH on Aug. 25, allowing investors to gain exposure to ZEC through NYSE Arca without directly holding the cryptocurrency.
ZCSH grew quickly during September as ZEC’s price climbed. The fund eventually passed $1 billion in assets as both the token price and investor demand increased.
However, the value of the fund can also fall when ZEC’s market price declines. Therefore, the drop in ZCSH assets was not necessarily caused entirely by investor withdrawals.
ZEC itself has fallen significantly from its September highs.
The token closed at $1,653.12 on Sept. 26 before dropping to $1,483.24 on Sept. 28. It then fell to $1,438.21 on Sept. 30 and $1,301.16 on Oct. 2. ZEC closed Oct. 3 at $1,304.32.
That means ZEC lost roughly 21% between the Sept. 26 close and Oct. 3.
The decline followed a powerful September rally in which ZEC moved from below $1,000 to above $1,600. As the rally weakened, traders also reduced leveraged positions. ZEC perpetual open interest on OKX fell from $236.8 million on Sept. 18 to $165 million on Sept. 28.
The ETF outflows happened during the same period, but the available data does not prove that the withdrawals caused the decline in ZEC. Profit-taking, lower leverage and weaker spot demand were also taking place at the same time.
Grayscale also completed a three-for-one forward share split for ZCSH on Sept. 30.
Before the split, ZCSH had 7,989,300 shares outstanding with a net asset value of $111.41 per share. After the split, the number of shares increased to 23,967,900 while the NAV per share fell to $37.14.
The split did not reduce the overall value of investors’ holdings. Each old share simply became three shares worth roughly one-third of the previous per-share value.
Earlier in September, Digital Currency Group also invested roughly $100 million in ZCSH through an authorized participant transaction. On Sept. 8, DCG received ZCSH shares in exchange for more than 85,705 ZEC.
Meanwhile, the Zcash network is preparing for its next major upgrade.
The Zcash Foundation announced the first release candidate for the NU7 upgrade on Oct. 2. Testnet activation is expected around Oct. 6.
The upgrade is designed to reduce Zcash’s target block time from 75 seconds to 25 seconds. It also introduces changes to transaction fees and measures intended to protect shielded transactions from spam.
Developers plan to make a final decision on the mainnet activation height on Oct. 20, with the current roadmap targeting Nov. 5 for the mainnet launch.
For now, Zcash investors are watching two major developments at the same time: whether ZEC can recover after its sharp September rally and whether the next network upgrade can support renewed activity.
