Does the end of the privacy coin rally mean a bear market is coming?

Written by Eric, Foresight News

Every bull market ends with some warning signs. Looking back, the sudden surge in privacy tokens has never been absent from these signs.

The same reason lies behind this recurring theme: there's nothing left to hype. When all concepts and narratives have run their course, the final act of capital usually chooses "privacy," a topic that has persisted since 2014.

There is a logical justification to hype up privacy at the end of a bull market. After the initial hype, many people often suddenly realize the original intention of Web3 amidst the emptiness of the bull-bear market transition, and then shout that they want to make privacy and decentralization great again, but in the end it is just another round of hype.

Although the process is the same, the triggering conditions for each round are not exactly the same.

2017 was arguably the heyday of privacy tokens, as there weren't many standout DApps available, and the industry was still figuring out its direction. Back then, ZEC, XMR, and DASH were absolute "hot commodities," generating even more discussion than Bitcoin. ZEC and XMR emerged with the "technological innovations" of zero-knowledge proofs and ring signatures, respectively, while DASH combined PoW and PoS.

Readers who didn't experience that period might not understand the extent of the market's enthusiasm for these tokens at the time. Back then, even whether Bitcoin was the absolute core of cryptocurrency was controversial, and many such tokens were rampant, claiming to be "better Bitcoin." ZEC's price surged to $30,000 in early 2018, while Bitcoin's highest price in that cycle was less than $20,000.

The end of 2021 and the beginning of 2022 saw a complete over-hyping of the privacy concept. After DeFi, NFTs, and the metaverse, projects including Aleo received hundreds of millions of dollars in funding, with SoftBank, a16z, and Tiger Global Management among the investors. At that time, the market genuinely believed that after the explosive growth of applications, privacy could finally move from concept to practical application.

Perhaps because everyone is making money and caught up in the hype, no one truly cares whether privacy is a basic necessity for the public, nor does anyone care whether, even if such a need exists, those in need are willing to invest a considerable cost just to ensure privacy. The result is that while the policy has been implemented, it's been a disaster.

In this cycle, the surge in privacy tokens, represented by ZEC, began in September 2025. Looking back, it's difficult to pinpoint a specific reason why it increased 20-fold in just three months. If we had to find a reason, it might be because it was "not so compliant."

2025 can be considered the year cryptocurrencies were fully embraced. Many European and American countries successively introduced regulatory laws, meaning that even those supporting cryptocurrency development couldn't escape scrutiny regarding identity verification and anti-money laundering regulations; DeFi was no exception. As a result, while cryptocurrencies are no longer considered securities, they are essentially no different from trading securities. Government scrutiny of individuals has not been relaxed; regulations on project teams and institutions have only been temporarily eased to avoid hindering innovation.

Furthermore, the arrests of fraudster Qian Zhimin in the UK, and Chen Zhi, whose Bitcoin was later seized, reveal an unspoken truth: although only you hold the private key, getting you to hand it over is not difficult for law enforcement agencies. When this fact is presented once again, it may trigger some investors to switch to privacy tokens.

However, the calls from BitMEX co-founder Arthur Hayes and a16z's mention of "privacy as a service" all occurred after November. Judging from the market trend, this seems more like a cover for distribution than a driving force for price increases. XMR may have held up for a couple more months due to factors such as the flight of Iranian high-ranking officials and hackers converting hundreds of millions of dollars in Bitcoin into XMR, but like others, it surged and then quickly fell back.

While it's too early to say for sure that the bull market is over, at least at the end of the last bull market, there were quite a few well-known figures and institutions promoting privacy-related trading strategies. Such strikingly similar scenarios should at least raise our vigilance.

The concept of privacy has persisted since 2014 because it genuinely fulfills certain gray-area needs, yet contradicts the actual need for "privacy." In reality, most people's understanding of privacy protection doesn't mean data is completely untraceable, but rather that it cannot be easily exposed. The concept of dark pools exists in financial trading, aiming to prevent large funds from impacting the market or being targeted by other funds, but this doesn't mean the transaction information itself is unverifiable.

The concept of privacy in Web3 can sometimes be overly extreme. Zcash's privacy transactions are optional, while XMR is privacy by default; the sender, receiver, and amount cannot be verified on-chain. This is the core reason why XMR was delisted by over 70 cryptocurrency exchanges worldwide in 2025. For most people, there seems to be insufficient reason to use XMR to hide their tracks. Furthermore, the process of purchasing XMR is itself traceable, and engaging in XMR purchases could easily be interpreted as engaging in illegal activities.

In short, most people simply want their records to be protected and respected, not completely hidden; regulators, in particular, cannot accept a channel that is practically tailor-made for money laundering. With current technology, anonymous on-chain transfers of USDT are indeed possible, and there's really little reason to use a targeted asset solely for privacy reasons.

Web3 has been talking about privacy for over a decade, but it seems to have consistently avoided the question of "what level of privacy do we actually need?" It hasn't found any real-world scenarios, and privacy tokens may forever remain the last ones left holding the bag in a sector rotation.