Privacy Tokens Have Outperformed the Market in Q4: Grayscale Reports

• Six crypto sectors fell in Q4 2025, while privacy tokens outperformed.
• Capital rotated into privacy assets like ZEC, XMR, and DASH.
• Network usage on major privacy chains rose, revealed a Grayscale report.

Q4 2025 broke the positive trend from Q3, as per digital asset management firm Grayscale. All six crypto sectors posted losses as markets cooled and traders locked in earlier gains.

Total crypto market cap stood near $2.96 trillion at the time of writing, as prices have crashed massively in the past 24 hours. BTC is down more than 2% while other altcoins are red as well. 

In its “Crypto Sectors Quarterly” report, Grayscale noted that fees across smart contract platforms fell quarter over quarter and year over year. Active addresses declined in both the currency and smart contract sectors.

“While on-chain activity softened in Q4 2025, similar pullbacks in usage metrics have historically occurred during market drawdowns and are not necessarily indicative of a longer-term structural deterioration in blockchain fundamentals,” Grayscale added.

Privacy Tokens Led a Defensive Rotation

Within a negative quarter, privacy-focused assets outperformed. The currencies sector held up better than application-layer assets, with privacy coins driving most of the relative strength.

This was not a broad rally. It was capital rotating into assets seen as useful under tighter rules and higher scrutiny.

Source: Grayscale

Zcash (ZEC) led the group. Demand for its shielded balances increased through 2025. Monero (XMR), Dash (DASH), Decred (DCR), Basic Attention Token (BAT), and Beldex (BDX) also ranked among the strongest risk-adjusted performers of the quarter.

Daily transactions of Dash have doubled during Q4. Brave’s browser ecosystem crossed 100 million monthly users, pushing BAT higher. Zcash and Dash both showed higher network use at the same time prices rocketed.

Related: Ethereum Proposes ERC-8092 to Boost Privacy and Accelerate Web3 Adoption

Regulation Pushed Privacy Into Focus

As blockchains move closer to traditional finance, transparency has become an underlying issue. Public ledgers expose balances, flows, and behavior by default. That does not fit payrolls, corporate treasuries, or regulated funds.

Grayscale expects US crypto market structure law to pass in 2026. Once reporting rules and asset classifications are set, regulated firms are likely to use blockchains directly. That raises the value of systems that allow verification without exposing data.

Meanwhile, Balaji Srinivasan, former Coinbase CTO, said that the crypto market entered a privacy era in December 2025. He added at the Binance Blockchain Week that the industry has now evolved from proof-of-work to smart contracts.

Privacy tokens dominated Q4’s top performers while most large-cap smart contract assets lagged. Balaji claimed that this rally was driven by zero-knowledge proofs that protect user data and protect their privacy.

Related: Privacy Layer zkPass Debuts on KuCoin with ‘No Vesting’ Airdrop