Zcash Is Only 1% of Bitcoin’s Market Cap, but Its Volatility Is More Than 3 Times Higher

ZEC's smaller market cap and higher volatility than BTC make options compelling for risk management and potentially attractive for premium income.

Zcash has been on an absolute tear. The privacy-focused cryptocurrency rose over 142% in the past month alone and reached $1,236.

Grayscale Head of Research Zach Pandl believes that its smaller market capitalization and significantly higher price volatility compared with Bitcoin could make options an especially useful tool for investors seeking risk management or alternative income.

Options Opportunity

Bitcoin has become considerably less volatile as the asset has matured. In its early years, BTC saw realized annualized volatility of around 125%. Over the past year, however, that volatility has averaged roughly 40%, putting Bitcoin at a level similar to the so-called “Magnificent 7” large-cap technology stocks. Zcash, however, remains a much smaller and more volatile asset.

Its market capitalization is just 1% of Bitcoin’s, while ZEC’s price volatility has averaged about 140% over the past year. This aspect can make options particularly useful for managing risk and pursuing alternative sources of income. At current volatility levels, a hypothetical covered call strategy on Zcash could generate premium income equivalent to an implied yield of 70%, compared with an annualized yield of about 30% currently available through Bitcoin covered call strategies.