Who will "pay" after TRUMP currency skyrocketed and plummeted?

On January 18, 2025, Trump announced on his social account that he would launch his personal Meme currency TRUMP . According to GMGN data, after the issuance of TRUMP currency, the market value once exceeded 30 billion US dollars. However, after hitting a high point of cumulative increase of more than 41,200%, it began to decline rapidly. According to CoinGlass data, as of January 21, TRUMP coins fell by 18.57% in 24 hours, with total liquidation exceeding US$50 million. Many people are curious: What is the hype logic behind the sudden rise and fall of TRUMP coins? Does it have anything to do with the plunge in mainstream currencies such as Bitcoin? Is it possible that TRUMP coin will repeat the previous ending of "using celebrity effect to speculate on cryptocurrency"?

Recently , Lawyer Liu Lei, director of the "Digital Economy Legal Affairs Department" and senior equity partner of Beijing Yingke (Shanghai) Law Firm, was interviewed by "Daily Economic News" on "Trump's "Coin Issue" Triggered a Huge Shock in the Cryptocurrency Market ! Behind the weekend “carnival” of Wall Street capital, who is “paying” for the hype? 》, express professional opinions on issues related to TRUMP currency. This article will use the surge and plunge after the issuance of TRUMP currency as the background, and based on the content of the interview, further demonstrate the relevant issues.

What is the logic behind the speculation of a TRUMP coin?

The logic of TRUMP currency speculation is actually very simple, relying on " celebrity effect + speculative psychology" to push up the price.

First of all, whether you like Trump or hate him, you have to admit that he is "the best in the world." Even if he simply opens his phone and posts a tweet, it can attract the attention of hundreds of millions of people. The launch of TRUMP coin this time took advantage of Trump 's influence and immediately attracted the attention of investors and media, thus creating a wave of speculation in the market. This popularity spread quickly through social media, making more and more people think that this was an "opportunity to make a fortune."

Secondly, the cryptocurrency market itself is crazy, with frightening price fluctuations. Many investors come here for the dream of "getting rich overnight". The sudden rise in the price of TRUMP currency is a reflection of this speculative psychology. Many people saw the soaring price of TRUMP coins and flocked into it, further pushing up the price of the currency. Especially in the early stages of project launch, market sentiment is more easily affected, and this short-term speculation will also intensify the intensity of speculation. This kind of speculative mentality is like a prairie fire, getting out of control.

In addition, coupled with the fueling of social media , Twitter (X), Reddit and other social platforms are full of discussions about TRUMP coins, and everyone has made this craze even more intense. This kind of community effect can be said to be very common in the currency circle. With the spread and discussion among investors, these projects quickly gained widespread attention.

However, here comes the problem: TRUMP coin itself actually has nothing, no actual technical support, and no real application scenarios. It is like a castle in the air, supported entirely by market sentiment. According to the official financial institutions of Wall Street, encrypted digital asset tokens issued relying on the "celebrity effect" often experience a "flash-in-the-pan" surge in the early stages of issuance, and then face a long correction. Put yourself at "risk of loss". Once the heat passes or market sentiment changes, prices will collapse instantly like a deflated rubber ball. Although this kind of speculation logic can allow people to see crazy increases in a short period of time, in the long run, there are great risks.

Two TRUMP coins are issued, and Bitcoin plummets

What does it matter?

Liu Lu believes that there must be a relationship between the sharp decline of mainstream cryptocurrencies such as Bitcoin and the hype of TRUMP coins!

First of all, the connection between them is reflected in the financial aspect. A large number of speculative funds are withdrawn from the mainstream digital asset market and are instead chasing short-term huge profits of TRUMP coins. This drastic change in capital flow will inevitably lead to market fluctuations. The cryptocurrency market is like a big pool, and the total amount of investors ' funds is limited. After the issuance of the TRUMP coin, the entire encrypted digital asset market suddenly became emotional. The market became more convinced that Trump would relax regulations on the encrypted asset industry, which also drove a large influx of encrypted digital asset investments. At the same time, funds from mainstream currencies such as Bitcoin have also been "sucked away".

Secondly, the transmission of market sentiment is also critical. The TRUMP currency rose so sharply that investors were excited at first, but after the excitement passed, they began to worry: "Will the TRUMP currency collapse soon?" This panic will soon spread to mainstream currencies such as Bitcoin. superior. When everyone gets scared, they sell quickly, and the price naturally plummets. This economic "drag effect" will cause the currency price of the entire market to fluctuate synchronously.

In addition, since the market foundation of TRUMP coin itself is not solid, its price fluctuations are mainly driven by short-term market speculation. Therefore, once market sentiment deteriorates and investors' risk appetite decreases, even projects that are not directly related to it will be affected by the market as a whole . When prices fall, investors will definitely sell high-risk currencies first. This is human nature.

In general, the high degree of linkage in the cryptocurrency market and the emotional resonance of investors often cause the fluctuations of the overall market to interact with each other. Therefore, there is indeed a correlation between the collapse of TRUMP coins and mainstream cryptocurrencies such as Bitcoin. However, this relationship is more of a resonance of market sentiment and real-time dynamics, rather than a closer technical correlation on another level. At the same time, investors must also understand that the main factors that truly affect cryptocurrency prices are still market sentiment, regulatory policies and the overall economic environment.

Three TRUMP coin issuers retain 80% of their shares

Risk: Is it cutting leeks?

The TRUMP coin issuer keeps 80% of the shares for itself! This kind of allocation is like keeping most of the cake for yourself and only giving some crumbs to investors. Of course many investors quit, feeling like they were being treated like "leeks".

(1) The hidden danger of the issuer retaining a large amount of shares for itself

First, this currency distribution model in which the issuer retains a large share for itself does hide great risks. With so many tokens in hand, the project side can sell them on the market at any time. If they see the right moment and throw out 80% of their tokens, the market will collapse in an instant. The funds invested by investors who entered the market later may disappear overnight. This risk is no joke. Secondly, there are also big problems with the transparency of the TRUMP coin project. After all, the project side has not made anything clear about how it will develop in the future, how the tokens will be allocated, and how the funds will be used. This uncertainty makes investors nervous and increases investment risks. Thirdly, this issuer’s reserved share model is not the “first” for TRUMP coins in the currency circle. The capital structure of many similar “air currency” project parties before has shown this typical “prophet model”, and There are lessons learned from the past: the project team uses the celebrity effect to attract investors, and then cashes out at a high position and runs away. Will TRUMP coin make the same mistake again? There has to be a question mark here. As an investor, you should still fully weigh the risks and benefits and avoid blindly following the trend. It is wiser to invest rationally and wait and see cautiously.

(2) Lessons learned from the hype of “celebrity effect”

Using the "celebrity effect" to speculate on cryptocurrency is nothing new. In the past, the "celebrity coins" and "influencer coins" had similar routines. They usually have the following characteristics:

1. Short-term surges and plummets : The "celebrity effect" is like a fire, which can ignite currency prices instantly. But this fire goes away just as quickly as it comes. Once the heat subsides, prices can plummet like a roller coaster;

2. Lack of practical value : Most of these coins have no practical use, and have neither technological innovation nor application scenarios. They exist for the sake of hype;

3. Emotion-driven investment : Most investors are attracted by the celebrity effect and have no time to study the project itself. When everyone sees others buying, they follow suit, which is completely blindly following the trend;

4. Insufficient transparency : Project parties always hide things and key information is not made public. Some projects may have problems such as unclear fund use plans and unfair token distribution, and may even have legal risks, triggering regulatory review.

Therefore, TRUMP coin is indeed experiencing a climax of speculation caused by the "celebrity effect" in the short term. However, TRUMP coin is essentially a meme coin that lacks actual value support, and its price fluctuations are completely dependent on market sentiment and speculation. As for whether TRUMP currency may repeat the previous issue of "using celebrity effects to speculate on cryptocurrencies," it still needs to be viewed comprehensively based on actual future market conditions and other factors. If TRUMP currency continues to lack actual project foundations and application scenarios, it is likely to face the risk of plummeting and bubble bursting in the future.

The fourth lawyer has something to say

The issuance of TRUMP coins has indeed set off a wave of "hype" around the world, but you must know that the supervision of lighthouse countries is no joke. Their SEC, CFTC, OFAC and other agencies have already set up heavy defense lines against virtual currencies. If virtual currencies are recognized as "securities" in the future, failure to register them will be illegal; if they involve anti-money laundering investigations, etc., it will violate the red line. In addition, each state also has its own regulatory laws and may take action at any time. In the future, as more national institutions enter the market, the market structure is likely to change.