Author: goodalexander
Compiled by: Deep Tide TechFlow
Why does XRP make people 'short circuit'?
In the cryptocurrency space, the existence of XRP has disrupted many traditional narratives, especially the mainstream views on venture capital (VC) and protocol value.
The initial perspective was that 'venture capital always tends to sell off, so choosing meme coins is a strategy against venture capital.' However, this viewpoint is gradually being overturned. It turns out that the true counter to 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-focused distribution model without relying on venture capital support.
Secondly, XRP further indicates that cryptocurrency whales are more concerned about the reliability of a protocol, which is closely related to the protocol's duration. The case of XRP challenges the core assumptions of venture capital, especially the following points that venture capital finds hard to accept:
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.
The contradiction between the number of users and value: XRP has only 20,000 active sending wallets, yet has a market capitalization of up to $180 billion, which completely contradicts the traditional view that 'protocol value needs to be supported by a large number of users.'
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 'Divine Candle' event of XRP/SOL and the warning of regulation
The 'Divine Candle' event of XRP/SOL (i.e., the sudden surge in price) occurred simultaneously with incidents of human exploitation, human trafficking, and attempted suicides during a live stream on Pump.fun. These events led people to reflect: when a protocol has a large number of users but lacks a review mechanism, it may trigger extremely negative consequences, including the breeding of illegal activities and the exacerbation 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 a trust relationship before accepting a certain token. This means users cannot arbitrarily send 'racist tokens' or other unpopular tokens to any address. While this design has been criticized as a 'high-friction' user experience (UX), it effectively prevents low-quality use while meeting the needs of high-quality users (such as banks). As the market gradually recognizes the problems that may arise without these security measures, this mechanism is being increasingly 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 'drive Web3.' This is the initial stage of market changes, but the live events of SOL have allowed people to truly understand what 'mass adoption beyond buying' looks like and recognize the importance of compliance.
Another important 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 'navy'-protected state. Any attempt to scrutinize Ripple Labs may face strong resistance from the U.S. government.
The biggest risk XRP once faced was the possibility that the U.S. government might accuse its unique node list (UNL) of being involved in money transmission and impose OFAC fines, while letting the SEC sue each validator to force compliance. However, with the changing regulatory environment, these risks are gradually transforming into advantages for XRP.
Protocols with similar risks (such as Cardano and XLM) have also taken more proactive actions. Nowadays, the U.S. regulatory environment has instead viewed them as important tools for combating scrutiny.
Moreover, the special 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 of up to $135 billion. As long as these assets are denominated in U.S. dollars, the U.S. government does not care about the reporting requirements of 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 sector. Therefore, XRP's research and development activities have shifted from 'marginalization' to becoming part of U.S. government policy.
Although recent price fluctuations of XRP have been partially attributed to retail-driven actions, in reality, especially for long-established coins, the holdings are highly concentrated. Most whales in the network have not sold off at current prices, even though market liquidity fully allows them to do so. This indicates their continued confidence in the future of XRP, which stems from the multiple factors mentioned above.
The logic of the market never goes wrong; our task is to understand it as much as possible and learn from it.
