The logic of the market never makes mistakes.

Author: goodalexander

Translated by: Deep Tide TechFlow

Why does XRP cause a "brain short circuit"?

In the cryptocurrency space, the existence of XRP has disrupted many traditional narratives, especially mainstream views on venture capital (VC) and protocol value.

The initial viewpoint suggested that "venture capital always tends to sell off, so choosing meme coins is a strategy against venture capital." However, this perspective is gradually being overturned. It turns out that what can truly counter venture capital is not meme coins, but protocols with stable cash flows and long-term agreements based in the U.S. (often referred to as "dino coins").

First, Hyperliquid demonstrated how cash flow-driven startups can achieve success through community distribution. Jeff initially supported this project with his own trading funds, proving that it is possible to establish a community-oriented distribution model without relying on venture capital support.

Second, XRP further indicates that cryptocurrency whales are more concerned with the reliability of the protocol, which is closely related to the protocol's existence time. The case of XRP challenges the core assumptions of venture capital, particularly the following points that are especially unacceptable to them:

• No venture capital exposure: XRP has received almost no venture capital investment, so venture capital cannot profit from it.

• Lack of smart contract technology: XRP does not rely on smart contracts, which contradicts the technological logic of most venture capital investments.

• Contradiction between user numbers and value: XRP has only 20,000 active sending wallets but boasts a market cap of up to $180 billion, which completely contradicts the traditional view that "protocol value needs a large user base to support it."

• Focus on transaction sending: The core function of XRP is to send transactions, and the efficiency of this single function makes other multifunctional protocols seem inferior.

The "God Candle" event of XRP/SOL and the warning from regulators

The "God Candle" event of XRP/SOL (i.e., the sudden price surge) occurred simultaneously with incidents of human exploitation, human trafficking, and suicide attempts during a live stream on Pump.fun. These events prompted reflection: when a protocol has a large user base but lacks a review mechanism, it can lead to extremely negative consequences, including the proliferation of illegal activities and the worsening of social issues. This situation will ultimately attract the attention of regulatory agencies or law enforcement.

This leads to another controversial feature of XRP: Trust Lines. Trust Lines require users to actively establish trust relationships before accepting a certain token. This means users cannot arbitrarily send "racist tokens" or other unpopular tokens to any address. Although this design has been criticized as a "high-friction" user experience (UX), it effectively prevents low-quality usage while meeting the needs of high-quality users (such as banks). As the market gradually recognizes the potential issues that could arise without these security guarantees, this mechanism is increasingly being accepted.

Bitcoin (BTC) has almost no application in such scenarios, yet its performance still far exceeds that of Ethereum (ETH), even though the latter claims to be able to "drive Web3." This is the initial stage of market change, but the SOL live event allowed people to truly understand what "mass adoption beyond just buying" looks like and realize the importance of compliance.

Another significant change is that since Trump's election, the aggressive enforcement regime has effectively ended. This has transformed U.S.-based protocols from facing survival risks to being in a state protected by the "Navy." Any attempts to scrutinize Ripple Labs could face strong opposition from the U.S. government.

The biggest risk XRP once faced was that the U.S. government might accuse its Unique Node List (UNL) of being involved in money transmission and impose OFAC fines on it, while allowing the SEC to sue each validator to force compliance. However, with the changing regulatory environment, these risks have gradually turned into advantages for XRP.

Protocols with similar risks (such as Cardano and XLM) have also taken more proactive actions as a result. Nowadays, the U.S. regulatory environment is viewed as an important tool for combating censorship.

Moreover, the unique position of the U.S. in the global financial system has also influenced this trend. The U.S. is one of the centers of global anonymous cash, as other countries find it difficult to enforce reporting requirements on U.S. financial institutions. Tether can be seen as an on-chain extension of this logic—a semi-compliant cash reserve pool with a scale of up to $135 billion. As long as these assets are denominated in U.S. dollars, the U.S. government does not care about reporting requirements from other countries. This is also the reason behind Tether's closure of operations in Europe.

The U.S. aims to strengthen the global dominance of the dollar through financial innovation in the cryptocurrency space. As a result, the development activities of XRP have shifted from "marginalization" to becoming part of U.S. government policy.

Although the recent price fluctuations of XRP have been partially attributed to retail-driven movements, in reality, especially for long-established coins, the holding of coins is highly concentrated. Most whales in the network have not sold at the current price, even though market liquidity fully allows them to do so. This indicates that they still have confidence in the future of XRP, and this confidence stems from the multiple factors mentioned above.

The logic of the market never makes mistakes; our task is to understand it as much as possible and learn from it.

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