While Bitcoin (BTC) was slipping below $100,000 on Friday, something unusual was happening in a corner of the crypto market that doesn't usually get much attention. Dash (DASH) was up 12.3%, extending a rally that started in late October and suggesting that bullish sentiment hasn't completely evaporated despite a brutal selloff from peak prices about 10 days earlier.

Privacy coins have spent the past two weeks making headlines with dramatic price action that defied the broader crypto market trend. The rally kicked off in late October, led by Zcash (ZEC) and Monero (XMR). Zcash became the top privacy coin this month, hitting an all-time high around $730 before investors decided to cash in their chips. The token is now trading in the $560-$565 range. Dash experienced a similar trajectory, rocketing to an all-time high around $147 on Nov. 4 before investors sold and crashed the price by 50%.

So what just happened? And more importantly, does this volatility signal that there's actually a real use case building for on-chain anonymity, or was this just another speculative frenzy in a market known for them?

Privacy coins work by obscuring sender, receiver, and transaction data, offering anonymity that Bitcoin simply cannot provide. That's a meaningful distinction in a world where every Bitcoin transaction is visible on a transparent ledger for anyone to see.

"Institutions cannot and will not move trillions of dollars on-chain using a fully transparent ledger," said Shahaf Bar-Geffen, CEO at COTI Group (COTI) in Israel. "They need to protect sensitive data to meet compliance requirements, just as they do in traditional finance. On-chain privacy solutions can solve this problem. That technology is now possible for the first time, at speed and at scale, and that's why the narrative is trending. It was a seminal moment, the dawn of a new era for finance."

As blockchain startups continue popping up and capturing venture capital interest, one recurring theme is the need for privacy-preserving mechanisms to ensure user autonomy and protect against threats like data breaches, theft, and fraud. This becomes especially important if large corporations are ever going to seriously move on-chain. COTI operates in this space as an Ethereum Virtual Machine-compatible Layer 2 solution.

The numbers from the rally are striking. Privacy-centric tokens accounted for an unprecedented 6% of all crypto trading volume during the spike. That's not a typo.

Why Did This Rally Happen?

News and commentary on the rally suggest a few possible explanations. One theory is that traders rotated into privacy coins as a sub-sector of the alt-coin market once the majors like Bitcoin and Ethereum (ETH) became expensive and started trading sideways.

A Galaxy Research report published on Nov. 4 immediately noted Zcash's breakout, saying somewhat tongue-in-cheek that "it suddenly feels everyone in crypto is a privacy expert." They pointed out that roughly 30% of ZEC supply was sitting in shielded pools, a super privacy layer that shields private transactions so funds are moved from transparent addresses on a blockchain to shielded ones in order to conceal transaction details. Galaxy cited venture firm a16z's 2025 State of Crypto report, which highlighted a spike in Google searches for privacy-related terms in recent months.

Another potential catalyst might be the $15 billion in Bitcoin seized from a Cambodian national by the U.S. Department of Justice on Oct. 14, which may have spooked some large Asian accounts into seeking more anonymous alternatives.

For domestic crypto day traders, technical chart breakouts only added fuel to the justification for a rally.

Understanding Privacy Coins

The simplest way to think about this is to imagine Bitcoin as a house made from glass where everything that happens inside is visible to the outside world. It's also vulnerable to hackers and theft. That's the transparent nature of transactions on a Bitcoin ledger. Basic privacy tokens turn that glass house into a brick house, said Bar-Geffen. No one will know who is inside that house, let alone who owns it.

But privacy protocols and their tokens have gotten an upgrade. Programmable Privacy protocols allow people to keep their brick house while inviting in whoever they like without uninvited guests showing up. "That's the standard that we have come to expect in our daily lives and now we can have it on-chain," Bar-Geffen explained.

Renewed interest in privacy stems from increasing threats around the world to people's rights to confidentiality, as well as growing awareness of data leaks and hacks leading to stolen money.

New legal certainty in the U.S. may have also played a role, where users now feel less afraid to hold and use privacy-enhancing cryptocurrencies, said Joel Valenzuela, Dash DAO (DASH) core member.

The Regulatory Reality Check

For some on Capitol Hill, privacy coins are primarily tools for tax evasion. That perception creates real challenges for the sector.

"If you intend to operate legally, then privacy doesn't really confer any tax benefits specifically anyway," said Valenzuela. "If hiding your money from the government is considered a tax benefit then maybe it is good for that, but I wouldn't recommend that course of action as an investor."

Many jurisdictions have scrutinized or even banned privacy coins on exchanges due to money-laundering concerns. South Korea and Australia have restricted them on exchanges. New anti-money laundering laws in the EU will no longer allow crypto exchanges and custodial services to list or hold privacy coins beginning in July 2027.

In the U.S., privacy coins remain legal to hold and use, but they face the same compliance requirements as other crypto. Exchanges have to implement know your customer and anti-money laundering procedures, which can limit listing. For example, Coinbase does not offer Monero, but it does offer Zcash and Dash.

These regulatory and liquidity challenges may constrain long-term adoption, regardless of the technology's merits.

Where Does This Leave Us?

"I think the market is recognizing that the recent out-performance of tokens in this sector is more than a passing trend," said COTI's Bar-Geffen. "There is every reason to look deeper at the real progress happening at the protocol level and to note that the privacy coins of early blockchain days are not where the real frontier of innovation is. Enterprises have been waiting for the infrastructure to handle confidential data for more complex use cases such as DeFi and tokenizing real world assets. It's possible to do that now."

Whether this rally represents the beginning of genuine institutional interest in on-chain privacy or just another chapter in crypto's long history of speculative excess remains to be seen. What's clear is that the technology has advanced significantly, the use case arguments have become more compelling, and the regulatory landscape continues to evolve in ways that will shape which privacy solutions survive and thrive.

Disclosure: The writer of this article owns Bitcoin and Ethereum.