Zcash Mining Profits Surge but Liquidity and Regulatory Pressures Loom

Zcash mining has become highly profitable, outperforming Bitcoin in earnings per rig and per megawatt-hour. By early September, mining rigs for Zcash were generating roughly twice the daily revenue of comparable Bitcoin machines and about four times more revenue per megawatt-hour. However, this profitability is driven by a temporary gap between Zcash's rising price and its slower difficulty adjustment, which can reverse quickly as difficulty catches up.

The Equihash algorithm used by Zcash is also used by other coins like Horizen (ZEN) and Komodo (KMD), providing miners with fallback options. However, these alternatives have much lower liquidity, making Zcash a more concentrated bet compared to Bitcoin, which has deeper fallback markets like Bitcoin Cash and Bitcoin SV.

Regulatory pressure is another challenge for Zcash miners. While no major jurisdiction has banned Zcash, exchanges are steadily reducing support due to compliance issues. The EU's Anti-Money Laundering Regulation, set to take effect in July 2027, will further restrict the availability of privacy-preserving assets on licensed exchanges. This shrinking liquidity means miners face increasing difficulties converting their mined ZEC into fiat.

Despite these challenges, Zcash remains an attractive option for miners as long as the difficulty-to-price gap persists. However, miners should avoid overcommitting to Equihash-only hardware and diversify their withdrawal and OTC relationships to manage the regulatory risks and liquidity constraints.