Whales quietly shift towards mid-cap privacy coins: Why are ZEN, RAIL, and DCR becoming the new favorites for funds?

The privacy coin sector is set to experience a structural shift in early 2026. According to the latest news, some funds are shifting from mainstream privacy coins with a market cap of several billion dollars to mid-cap projects. Whale accounts significantly increased their holdings of ZEN, RAIL, DCR, and other mid-cap privacy coins in January. This has been interpreted by the market as a signal of early positioning for the next phase of the privacy track.

Phenomena and Signals of Capital Shift

Why Whales Are Turning

Against the backdrop of the overall warming of the privacy coin sector, capital flows are showing interesting differentiation. Although mainstream privacy coins have large market caps, their growth potential is relatively limited; meanwhile, mid-cap projects have found a balance between liquidity and growth prospects. This shift is not random but validated by on-chain data and institutional behavior—participation from traditional institutional funds like Grayscale further confirms the rationality of this trend.

Precise Signals of Institutional Deployment

According to relevant information, Grayscale’s latest Q1 asset observation list added several projects including ZEN. This not only reflects ongoing institutional interest in the privacy sector but also indicates that mid-cap privacy coins are entering the research and allocation scope of institutions. On-chain data shows that Grayscale-related products have been continuously increasing their holdings of ZEN since late 2024, with current holdings exceeding 5% of circulating supply, a clear bullish signal.

Performance of Three Projects

ZEN: From Zencash to Privacy Ecosystem

ZEN’s performance is particularly eye-catching. It surged over 50% in January, with a market cap of about $226 million. Although it has retreated from its 2021 high, signs of sustained long-term institutional involvement are evident. The project positions itself as a privacy layer protocol, emphasizing on-chain privacy computation and transactions within a compliant framework. This balanced approach is attractive to institutional investors.

According to data, ZEN is actively traded on major exchanges like Coinbase and Binance, frequently ranking among the top gainers. More importantly, Grayscale’s continued accumulation signals institutional bullishness on mid-cap privacy assets. Such institutional participation often brings broader recognition to the project.

RAIL: Practical User of DeFi Privacy

Railgun is a privacy protocol based on multiple mainstream blockchains, supporting anonymous DeFi operations via zero-knowledge technology. On-chain analysis shows that over the past 30 days, RAIL’s balances on trading platforms have decreased while large addresses’ holdings have increased significantly, a typical whale deployment pattern. More convincingly, its fundamentals show that Railgun processed $2 billion in transactions in 2025, with revenue growth providing solid support for its token valuation.

DCR: Combining Privacy and Governance

Decred, as a Layer 1 network supporting private transactions, has recently undergone structural changes. Its staking ratio has exceeded 62% of the total supply, reaching a near one-year high. A high staking rate usually reflects holders’ confidence in the project’s long-term prospects and enhances network security.

Why Mid-Cap Privacy Coins Are More Likely to Break Through

Analysts believe that mid-cap privacy coins have relative advantages in liquidity and growth potential. Specifically:

• Sufficient Liquidity: Listed on mainstream exchanges with deep trading volume, less susceptible to manipulation than small-cap coins.
• Clear Growth Space: Smaller market cap base means that once privacy demand heats up, the probability of surpassing $1 billion market cap is higher.
• Institutional Recognition: Participation from traditional financial institutions like Grayscale provides regulatory backing.
• Sector Momentum: The overall warming of the privacy coin sector benefits related projects through sector effects.

What Does This Shift Mean?

The capital shift from large-cap to mid-cap assets reflects more than simple arbitrage; it indicates a market re-evaluation of the development stage of the privacy sector. Mainstream privacy coins have become relatively mature assets with limited growth expectations; meanwhile, mid-cap projects represent the next wave of privacy technology applications—from simple anonymous transfers to DeFi privacy, cross-chain privacy computing, and more complex scenarios.

Whales and institutional deployment may be preparing for a new wave of privacy coin market performance in 2026.

Summary

The capital shift within the privacy coin sector is not accidental. From Grayscale’s increased holdings to whale deployments and the improving fundamentals of RAIL, DCR, and others, all point in the same direction: mid-cap privacy coins are entering the attention of funds and institutions. Among them, ZEN leads with institutional backing and ecosystem development, RAIL relies on real revenue support, and DCR demonstrates confidence through high staking ratios.

If privacy demand indeed heats up, these mid-cap projects are more likely to achieve a $1 billion market cap breakthrough in 2026. However, it’s important to note that policy risks in the privacy sector always exist; technological progress and real-world application implementation are the long-term supports.