Original author: goodalexander
Compiled by: TechFlow
Reprinted: Luke, Mars Finance
Why does XRP make people 'short circuit'?
In the field of cryptocurrency, the existence of XRP has disrupted many traditional narratives, particularly 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 turns out that what can truly combat venture capital is not meme coins, but protocols with stable cash flows, as well as long-term protocols based in the U.S. (often referred to as 'dino coins').
First, Hyperliquid demonstrates how cash flow-driven startups can achieve success through community distribution. Jeff initially supported this 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 with the reliability of the protocol, which is closely related to the protocol's time of existence. The case of XRP challenges the core assumptions of venture capital, particularly the following points that are especially unacceptable to venture capitalists:
No venture capital exposure: XRP has received almost no investment from venture capital, so venture capitalists 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 a market value of up to $180 billion, which is completely contrary to the traditional view that 'protocol value needs a large number of users 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 look inferior.
The 'Divine Candle' event of XRP/SOL and regulatory warnings
The 'Divine Candle' event of XRP/SOL (i.e., a sudden surge in price) occurred simultaneously with incidents of human exploitation, human trafficking, and suicide attempts during the live broadcast on Pump.fun. These incidents prompted reflections on the negative consequences that may arise when a protocol has a large number of users but lacks oversight mechanisms, including the breeding of illegal activities and the worsening of social issues. Such situations 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 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 usage while meeting the needs of high-quality users (such as banks). As the market gradually recognizes the potential problems associated with the absence of these safeguards, this mechanism is increasingly being accepted.
Bitcoin (BTC) has almost no application in such scenarios, but 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 truly made people understand what 'mass adoption beyond buying' looks like and realize the importance of compliance.
Another significant change is that since Trump's election, the aggressive enforcement regime has essentially ended. This has transformed U.S.-based protocols from facing existential risks to being in a 'protected' status. Any attempt to scrutinize Ripple Labs may face strong resistance from the U.S. government.
The biggest risk that XRP once faced was that the U.S. government could 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, as the regulatory environment has changed, these risks have gradually turned into advantages for XRP.
Protocols with similar risks (like Cardano and XLM) have also taken more proactive actions. Nowadays, the U.S. regulatory environment sees them as important tools against censorship.
Moreover, the special status of the United States 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 valued at 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 exit from the European market.
The U.S. hopes to strengthen the global dominance of the dollar through financial innovation in the cryptocurrency sector. As a result, the R&D activities of XRP have shifted from 'marginalized' to being part of U.S. government policy.
Although recent price fluctuations of XRP have been attributed by some to retail-driven movements, in reality, especially for long-established coins, their holdings are highly concentrated. Most whales in the network have not sold at the current price, even though market liquidity completely allows them to do so. This indicates they still have confidence in the future of XRP, and this confidence comes 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.
