Privacy coin Zcash (ZEC) has fallen 21 percent from its recent peak, entering a short-term correction phase.

Decrypt, a blockchain media outlet, reported on Oct. 1 that Zcash was trading at $1,333.50, down 7.29 percent on the day. That is 21 percent below the $1,698.00 high hit in late September.

Some assess the decline as largely a pause for breath after a sharp short-term rise. Zcash turned lower after jumping about 253 percent from a low of $480.72. The recent drop could be read as bearish, but it is not seen as unusual given the scale of the earlier surge.

Market conditions were also not supportive. Bitcoin rose to $85,600 after a lower-than-expected Personal Consumption Expenditures (PCE) price index was released on Sept. 30, then gave back gains. The U.S. 10-year Treasury yield ended at 5.29 percent, and the probability of a Federal Reserve rate hike in October, based on CME FedWatch, fell from 70 percent to below 50 percent.

On supply and demand, Grayscale's spot Zcash exchange-traded fund (ETF) has emerged as a variable. Grayscale launched a spot Zcash ETF under the ticker "ZCSH" on Aug. 25 and recorded net inflows of $233 million through mid-September. Net outflows of $30.25 million occurred on Sept. 30, trimming cumulative net inflows to about $268 million.

Technical indicators still put more weight on the possibility of a correction than on trend damage. The relative strength index (RSI) stands at 50.2, a neutral level, and the average directional index (ADX) remains high at 52.0. The indicator shows trend strength rather than direction, and readings above 25 are viewed as a clear trend. A high reading, however, is a concern because it is a lagging indicator reflecting the impact of the prior surge.

Moving averages also still show an upward structure. The 50-day exponential moving average (EMA) is above the 200-day exponential moving average, which is interpreted as bullish for the medium- to long-term trend. If declines continue, the two lines could converge, leaving room for a possible signal of weakening momentum.

Zcash fell from $635 to an intraday low of $309 after the disclosure of a vulnerability in the Shielded Pool in June, then climbed back above $1,600. That underpins the view that the current move is closer to a correction than a breakdown.

The market sees a bigger chance of testing key support if Zcash falls below $1,233.00 on a daily close. If it regains $1,410.72, the uptrend could resume. Market participants are watching ETF fund flows, money movement and the daily closing price.