Cryptocurrencies for privacy: is it worth investing in Monero, Zcash, and their analogs?

With crypto regulation increasing worldwide, "private" coins should be in trouble. But this has not been observed. On the contrary, "private" cryptocurrencies are showing awe-inspiring growth.

What are "anonymous cryptocurrencies"?

The blockchains of the vast majority of cryptocurrencies allow you to track the movement of every bit of every coin between wallets, as all transactions are public and open. Tying a specific wallet, say in the Bitcoin or Ethereum network, to a particular person is undoubtedly more complex than a bank account, but this task is also more realistic. So, we can't discuss any anonymity of "classic" cryptocurrencies.

Cryptocurrencies focused on ensuring privacy use several technologies that make it difficult or impossible to track transactions and, as a result, to tie wallets to personalities:

Zero-sum proofs (the most common variant is zk-SNARKs) allow for the evidence of the facts of a transaction without disclosing information.
"Ring signatures" are digital signatures of multiple users combined in a single transaction, hiding the real sender of funds.
Hidden addresses — using one-time addresses for each transaction.
Transaction shuffling — combining multiple transactions into a single transaction to hide the senders and receivers of funds.

In addition, anonymous coins use advanced cryptographic techniques to hide addresses and prevent individual coins from being tracked. However, it's worth noting that so far, no private cryptocurrency has combined all of the above technologies — developers are limited to a combination of 2-3 of them.

Regulation of anonymous cryptocurrencies

Regulators worldwide treat private cryptocurrencies even more suspiciously than "classic" ones. The less ability the government has to control an asset, the greater the anxiety caused by that asset. To be fair, it must be recognized that private cryptocurrencies are actively used by criminals, for example, in the drug trade.

So, attempts to regulate anonymous cryptocurrencies around the world heavily are not surprising:

Japan banned the circulation of anonymous cryptocurrencies back in 2019.
South Korea banned the listing of such assets on crypto exchanges in 2020.
In 2023, the European Union de facto followed South Korea's lead. The strict requirements for anonymous cryptocurrencies in the MiCA bill led to their delisting on most European platforms.
Since June 2022, the Financial Action Task Force (FATF) has recommended that governments tighten regulation of private crypto assets.

However, at the end of 2024, proponents of anonymity in the crypto world won an essential victory in the legal field. The U.S. Court of Appeals for the Fifth Circuit overturned sanctions imposed in 2022 on Tornado Cash, a service that mixes transactions in the Ethereum blockchain to hide the "digital footprint" of tokens. Now, attorneys for the service's creators are seeking to have money laundering charges dropped based on the ruling. This is the first favorable court ruling against anonymous crypto services and an important precedent for future litigation.

What is happening in the "anonymous crypto market"?

Private cryptocurrencies have shown strong growth since the beginning of December 2024. For example, the largest anonymous coin, Monero (XMR), grew by more than 30% in the first week of December. As of the end of the month, the coin has already experienced a slight correction but is still trading around $188-$190. These are the highest values since June 2022.

The second most capitalized private coin — ZCash (ZEC) — follows the path of XMR. The same rapid growth occurred in December, and by the end of the month, ZEC had reached record highs since June 2022. As of the end of December, ZEC is trading around $70.

Other anonymous cryptocurrencies are significantly inferior to the leaders in terms of capitalization and, therefore, significantly more volatile. However, in general, their rate movements also repeat this pattern.

The key "growth factor" was the court ruling on Tornado Cash — quotes of the "anonymous sector" currencies went up immediately after its release.

Which anonymous currencies are worth keeping an eye on in 2025?

First of all, it is necessary to highlight the three largest anonymous cryptocurrencies on the market:

Monero is the unambiguous leader of the "private segment" in capitalization. As of December 24, 2024, XMR has a capitalization of $3.42 billion and ranks 40th in the CoinMarketCap ranking.
ZCash is the second most capitalized private coin, well behind the leader in terms of capitalization at $1.14 billion. As of December 24, it ranked 90th in the CoinMarketCap rankings.
Dash (DASH) was not originally classified as an anonymous cryptocurrency but "joined the club" after the introduction of PrivateSend — the ability for users to make their transactions anonymous. As of December 24, 2024, the coin's capitalization is $496 million, which gives it 159th place in the CoinMarketCap ranking. DASH is trading at around $41. It should be noted that DASH began to grow earlier than other anonymous coins — in late November, but periodic sharp corrections accompany its growth.

In addition, the market has several anonymous coins with great technological potential, but so far, this potential has not been realized financially. A prime example is the Secret Network (SCRT). This coin is designed to provide anonymity when using decentralized applications and is often mentioned by experts as one of the most promising. However, SCRT has not shown significant growth for two years.

Is it worth getting involved with anonymous cryptocurrencies?

There is a significant market demand for digital currencies that provide anonymity of transactions — the sharp jump in the rate of most such assets at the end of 2024 serves as excellent proof of this. So, such coins will not go anywhere in the foreseeable future, and their investment prospects remain extremely tempting, despite the "tightening of the screws" by regulators.

On the other hand, making private currencies the main focus of a crypto portfolio is probably too risky. When just one court decision, and not the highest court, can so seriously affect the quotations of several coins, it does not speak well for the stability of the "anonymous segment" of the crypto market. After all, no one can guarantee that the next high-profile decision will also be favorable.