Once in a blue moon, unexpected catalysts can be a blessing for investors. Foundry Digital, the world's largest Bitcoin (BTC +1.53%) mining pool, plans to launch an institutional-grade Zcash (ZEC +0.75%) mining pool in April, marking its first operational expansion beyond Bitcoin.
For those who hold the privacy coin, this is a huge new green flag that's hard to overstate, and pretty much nobody saw it coming. But whether it justifies an investment of $1,000 depends on a few nuances worth examining.
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Why the biggest name in Bitcoin mining chose Zcash
Foundry Digital is a Bitcoin mining organization that's notable for both its size and its regulatory compliance certifications, which public financial companies require when they do business with mining operators directly.
CRYPTO: BTC
Key Data Points
Per its Chief Executive Officer Mike Colyer, Zcash is now sufficiently mature to be an institutional-grade asset, at least if there were institutional-grade mining infrastructure, which his business will now provide. The privacy coin has seen a surge in interest during the past 12 months, and its price is up almost 600%.
Mining Zcash is going to need fresh investment from Foundry Digital, as the specialized hardware it uses to mine Bitcoin can't be used to mine Zcash. Thus, this is a signal that management believes there will be an even greater return in store down the road. That's pretty bullish for Zcash, as the only way a mining business would realize a profit from mining the asset is by selling it to its target customers in financial institutions.
But is it worth the investment?
Today, more than 31% of Zcash's supply sits in shielded addresses, which offer the privacy features the coin is known for. Shielded coins tend to be held rather than traded, tightening the asset's float available for public trading and creating upward pressure when demand increases. So if Foundry's foray into Zcash mining plays out as its management expects, more institutional capital will be locked up in the shielded pool, which should give a nice tailwind for the coin's price.
CRYPTO: ZEC
Key Data Points
But that doesn't really solve any of the dealbreakers that Zcash has for most investors.
Although its supply policy is the same as Bitcoin's, with a maximum of 21 million coin that can ever exist, it's still an altcoin that's quite volatile, highly risky, and generally fairly early in its adoption curve compared to crypto majors. If your crypto portfolio is already diversified with safer investments and you're seeking some growth, it's certainly worth buying to get exposure to the privacy coin segment. But be aware that it's a long-term play, and that it's probably too risky for most people to bet $1,000 on.
