The logic of the market never makes mistakes.
Author: goodalexander
Compiled by: Shen Chao 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 viewpoint 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 has been proven that what can truly counter venture capital are not meme coins, but protocols with stable cash flows and long-standing U.S.-based protocols (often referred to as 'dinosaur coins' or Dino coins).
Firstly, Hyperliquid demonstrates how cash flow-driven startups can achieve success through community distribution. Jeff initially supported the project with his own trading funds, proving that a community-oriented distribution model can be established without relying on venture capital support.
Secondly, XRP further indicates that cryptocurrency whales are more concerned about the reliability of the protocol, and this reliability is closely related to the protocol's existence duration. The case of XRP challenges the core assumptions of venture capital, particularly the following points which are especially unacceptable to VCs:
No venture capital exposure: XRP has received almost no venture capital investment, making it impossible for VCs to profit from it.
Lack of smart contract technology: XRP does not rely on smart contracts, which contradicts the technological logic behind most venture capital investments.
The 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 requires 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 singular function makes other multifunctional protocols look inferior.
The 'Divine Candle' event of XRP/SOL and the warning from regulators
The 'Divine Candle' event of XRP/SOL (i.e., the sudden price surge) occurred simultaneously with events of human exploitation, human trafficking, and attempted suicides appearing on Pump.fun live broadcasts. These events have prompted people to reflect: when a protocol has a large number of users but lacks a review mechanism, it can lead to extremely negative consequences, including the breeding of illegal activities and the deterioration of social issues. This situation will ultimately attract the attention of regulatory agencies or law enforcement.
This introduces another controversial characteristic of XRP: Trust Lines. Trust Lines require users to proactively establish a trust relationship before accepting a certain token. This means users cannot arbitrarily send 'racist tokens' or other unwanted tokens to any address. Although 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 potential problems of not having these security guarantees, this mechanism is increasingly being accepted.
Bitcoin (BTC) has little 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 changes, but the live event of SOL has made people truly understand what 'mass adoption beyond purchase' looks like, and realize the importance of compliance.
Another important change is that since Trump's election, the radical 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 attempt to censor Ripple Labs may face strong resistance from the U.S. government.
The biggest risk XRP once faced was the possibility of the U.S. government accusing its Unique Node List (UNL) of money transmission violations and imposing OFAC fines on it, while having the SEC sue each validator to force compliance. However, with changes in the regulatory environment, these risks have gradually transformed into advantages for XRP.
Protocols with similar risks (such as Cardano and XLM) have thus taken more proactive actions. Nowadays, the U.S. regulatory environment has instead regarded them as important tools against censorship.
Moreover, the unique position of the United States in the global financial system has also influenced this trend. The U.S. is one of the centers for anonymous cash globally, 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 other countries' reporting requirements. This is also the reason behind Tether's closure of operations in Europe.
The U.S. hopes to strengthen the global dominance of the dollar through financial innovation in the cryptocurrency space. As a result, XRP's R&D activities have shifted from 'marginalized' to being part of U.S. government policy.
Although the recent price fluctuations of XRP are attributed by some to retail-driven movements, in reality, especially for long-standing coins, its holdings are 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 their continued confidence in XRP's future, which stems from the aforementioned multiple factors.
The logic of the market never makes mistakes; our task is to understand it as much as possible and learn from it.
