Who will pay for the hype after the TRUMP coin's big pump and big dump?

On January 18, 2025, Trump announced on his social media account that he will launch his own Meme coin, TRUMP. According to GMGN data, after the issuance of TRUMP coin, its Market Cap once exceeded 30 billion USD. However, after reaching a cumulative increase of over 41200%, it began to decline rapidly. According to CoinGlass data, as of January 21, TRUMP coin has dropped by 18.57% in the past 24 hours, with a total amount of liquidation exceeding 50 million USD. Many people are curious about the speculative logic behind the big pump and big dump of TRUMP coin. Does it have any relation to the major cryptocurrencies like Bitcoin? Is there a possibility that TRUMP coin will repeat the outcome of the previous "celebrity effect" in cryptocurrency speculation?

Recently, Liu Lei, the Director of the Digital Economy Legal Affairs Department and Senior Partner of Yingke (Shanghai) Law Firm, was interviewed by the Daily Economic News. In the article 'Trump's Coin Issuance Causes Tremors in the Cryptocurrency Market! Behind the Wall Street Capital Weekend 'Carnival', Who Is Paying for the Hype?', Liu Lei provides professional insights on TRUMP coin. Based on this interview, this article will further discuss the issues related to the big pump and big dump after the TRUMP coin issuance.

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  1. What is the hype logic of the TRUMP coin? **

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

First of all, Trump, whether you like it or hate it, has to admit that he is the "top of the world." Even if he simply opens his phone and tweets, it can attract the attention of hundreds of millions of people. The launch of the TRUMP coin is to take advantage of Trump's influence, which immediately attracted the attention of investors and the media, thus creating a wave of hype in the market. This popularity spread rapidly through social media, making more and more people feel that it is an "opportunity to make a fortune".

**Secondly, the cryptocurrency market itself is very crazy, with huge price fluctuations. Many investors are here for the dream of 'getting rich overnight', and this is exactly the manifestation of such speculative psychology in the big pump of TRUMP coin's price. Seeing the sharp rise in the price of TRUMP coin, many people rushed in, further driving up the price. Especially in the early stages of the project launch, market sentiment is more easily influenced, and this short-term speculative behavior will also intensify the speculation. This speculative psychology is like a wildfire, unstoppable once ignited.

**In addition, **coupled with the boost from social media, discussions about TRUMP coin are everywhere on social platforms like Twitter (X) and Reddit, fueling the frenzy even more. This kind of community effect is very common in the coin circle. Under the spread and discussion among investors, these projects quickly gained widespread attention.

However, here's the problem: the TRUMP coin itself actually has nothing, no actual technical support, and no real application scenarios, it is like a castle in the air, all supported by market sentiment. According to the views of official financial institutions on Wall Street, encryption digital asset tokens that rely on the "celebrity effect" issuance often have a "short-lived" surge in the initial stage of issuance, and then will face a long correction market, and the bottom-buying behavior will put itself in the "risk of loss". Once the heat passes, or the market sentiment changes, the price will collapse in an instant like a deflated ball. Although this hype logic can make people see crazy increases in a short period of time, in the long run, there is a lot of risk.

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Two TRUMP coin issuance, and BTC big dump

What does it matter? **

Liu Lu believes that there must be a connection between the big dump of mainstream cryptocurrencies like BTC and the speculation of TRUMP coin!

First of all, the connection between them is reflected in the capital side, where a large amount of speculative funds are withdrawn from the mainstream digital asset market and instead chase the short-term windfall profits of TRUMP coins, and this drastic change in the direction of capital flows will inevitably lead to market volatility. The Cryptocurrency market is like a big pool, and the total amount of money for investors is limited. **After the issuance of TRUMP coin, the entire encryption digital asset market suddenly boiled over, and the market was more convinced that Trump would relax the regulation of the encryption asset industry, which also drove the influx of a large number of encryption digital asset investments. At the same time, the funds of mainstream currencies such as BTC have also been "sucked away".

Secondly, the transmission of market sentiment is also crucial. When TRUMP coin surged, investors were excited at first, but after the excitement faded, they started to worry: 'Will TRUMP coin crash soon?' This panic sentiment will quickly spread to mainstream coins like BTC. When everyone is afraid, they will quickly sell, and naturally, the price will plummet. This economic 'dragging effect' causes the prices of the entire market to fluctuate synchronously.

Moreover, due to the fact that TRUMP coin itself does not have a solid market foundation, its price fluctuations are mainly driven by short-term market speculation. Therefore, once the market sentiment worsens and investors' risk appetite decreases, even projects that have no direct relationship with it, when the market as a whole falls, investors will definitely sell high-risk currencies first. This is human nature.

In general, the high degree of interconnectedness of the cryptocurrency market and the emotional resonance of investors often make the volatility of the overall market affect each other. Therefore, there is indeed a correlation between the collapse of TRUMP coin and mainstream cryptocurrencies such as BTC, however, this relationship is more of a resonance of market sentiment and real-time dynamics than a closer technical correlation on another level. At the same time, investors should also understand that the main factors that really affect the price of Cryptocurrency are still market sentiment, regulatory policies, and the overall economic environment. **

Three TRUMP coin issuance party retains 80% of its own shares

Risk: Is it cutting leeks?

**TRUMP coin issuance party retains 80% of its own share! This distribution method is like keeping most of the cake to yourself and giving only a little cake crumb to the investor. Of course, many investors quit and feel like they are being treated as "leeks".

(一)The Hidden Risks of Issuance Parties Holding Large Amounts of Shares

First, this kind of issuance distribution model in which the issuing party retains a large number of shares does hide great risks. With so many tokens in their hands, the project team can sell them in the market at any time. If they see the right time and throw away 80% of the tokens in their hands, the market will collapse in an instant. The money invested by investors who enter the market later may be wiped out overnight, and this risk is not a joke. Second, there is also a big problem with the transparency of the TRUMP coin project. After all, the project team did not say anything clearly, how to develop in the future, how to distribute tokens, and how to use funds. This uncertainty makes investors' hearts beat and increases the risk of investment. Third, this issuance party retains its own share model, which is not the "first" of TRUMP coin in the currency circle, and the capital structure of many similar "air coin" project parties has shown this typical "prophet model", and there are lessons from the past: the project party uses the celebrity effect to attract investors, and then cash out at a high level and run away. Will TRUMP Coin repeat the mistakes of the past? There's a question mark here. **As an investor, you should still fully weigh the risks and benefits, and avoid blindly following the trend. Rational investment and cautious wait-and-see are wiser choices. **

(2) Lessons from the hype of the "celebrity effect"***

It's no longer a novelty to use the 'celebrity effect' to hype up cryptocurrencies. The past 'star coins' and 'internet celebrity coins' had similar routines. They usually have the following characteristics:

  1. Short-term big pump big dump: The "celebrity effect" is like a fire that can instantly ignite the price of a coin. But this kind of fire comes and goes quickly. Once the heat subsides, the price will plummet like a roller coaster, experiencing a big dump.

2. Lack of actual value: Most of these coins have little practical use and lack technological innovation or application scenarios. Their existence is purely for speculation.

3. Emotion-driven Investment: Most investors are attracted by the celebrity effect and have no time to research the project itself. They see others buying and follow blindly, completely driven by herd mentality.

4. Lack of transparency: The project party is always hidden, and the key information is not disclosed. Some projects may have problems such as unclear plans for the use of funds, unfair distribution of tokens, and may even have legal risks, triggering regulatory scrutiny.

**So, **TRUMP coin is indeed experiencing a speculative climax caused by the "celebrity effect" in the short term, but fundamentally, TRUMP coin is a meme coin lacking actual value support, and its price fluctuations depend entirely on market sentiment and speculation. As for whether TRUMP coin may repeat the previous issue of "using the celebrity effect to hype cryptocurrency", it still needs to be comprehensively considered in combination with the actual market situation and other factors in the future. If TRUMP coin continues to lack actual project foundation and application scenarios, it is likely to face the risk of big dump and bubble burst in the future.

Four Lawyer has something to say

The issuance of TRUMP coins has indeed set off a "hype boom" around the world, but you must know that the regulation of the ** lighthouse country is not a joke. ** Their SEC, CFTC and OFAC and other institutions have long set up a lot of defenses against virtual currency, and if in the future, virtual currency is recognized as "security", and it is illegal not to register; If it involves anti-money laundering investigations, it is even more of a red line. In addition to this, each state also has its own regulatory laws that can be taken at any time. **In the future, as more state institutions enter the market, the market landscape is likely to change. **

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