After the TRUMP coin skyrocketed and plummeted, who will "pay the bill" for the hype?

On January 18, 2025, Trump announced on his social account that he would launch a personal meme coin, TRUMP. According to GMGN data, after the issuance of TRUMP, the market value once exceeded 30 billion US dollars. However, after hitting a high point of more than 41,200% cumulative increase, it began to fall rapidly. According to CoinGlass data, as of January 21, TRUMP fell 18.57% in 24 hours, and the total liquidation amount exceeded 50 million US dollars. Many people are curious: What is the hype logic of the surge and plunge of TRUMP? Is it related to the sharp drop of mainstream currencies such as Bitcoin? Is it possible for TRUMP to repeat the previous ending of "using the celebrity effect to hype cryptocurrency"?

Recently, Lawyer Liu Lei, Director of the "Digital Economy Law Department" and Senior Equity Partner of Beijing Yingke (Shanghai) Law Firm, accepted an interview with the "Daily Economic News" and expressed his professional views on issues related to TRUMP coin in the article "Trump's "coin issuance" triggered a huge shock in the cryptocurrency market! Who is "paying" for the hype behind the weekend "carnival" of Wall Street capital? ". This article will take the surge and plunge of TRUMP coin after its issuance as the background, and based on the content of the interview, further discuss the relevant issues.

一 What is the hype logic of TRUMP coin?

The hype logic of TRUMP coin is actually very simple, which is to push up the price by "celebrity effect + speculative psychology".

First of all, Trump, whether you like him or hate him, you have to admit that he is the "global top streamer". Even if he simply opens his mobile 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 the media, thus creating a wave of hype in the market. This enthusiasm spread quickly through social media, making more and more people think that this is an "opportunity to make a fortune".

Secondly, the cryptocurrency market itself is very crazy, and the price fluctuations are frightening. Many investors come here for the dream of "getting rich overnight", and the surge in the price of TRUMP coin this time is a manifestation of this speculative mentality. Many people saw the sharp rise in the price of TRUMP coin and rushed into it, further pushing up the price of the coin. Especially in the early stage of the project launch, market sentiment is more easily affected, and this short-term speculative behavior will also intensify the intensity of speculation. This speculative mentality is like a prairie fire, which is out of control.

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

However, the problem is: TRUMP coins themselves actually have nothing, no actual technical support, and no real application scenarios. It is like a castle in the air, relying entirely on market sentiment. According to the views of official financial institutions on Wall Street, encrypted digital asset tokens issued based on the "celebrity effect" often experience a "flash in the pan" surge in the early stages of issuance, and will face a long correction afterwards. Bottom-fishing behavior will instead put itself at "risk of loss". Once the heat is over, or market sentiment changes, the price will collapse instantly like a deflated ball. Although this kind of hype logic can make people see crazy gains in a short period of time, in the long run, there are great risks.

Second, what is the relationship between the issuance of TRUMP coins and the sharp drop in Bitcoin?

Lawyer Liu believes that the sharp drop in mainstream cryptocurrencies such as Bitcoin and the hype of TRUMP coins must be related!

First, the connection between them is reflected in the capital side. A large amount of speculative funds have been withdrawn from the mainstream digital asset market and turned to chase the short-term huge profits of TRUMP coins. This drastic change in the flow of funds 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 TRUMP coin, the entire encrypted digital asset market suddenly became emotional, and the market became more convinced that Trump would relax the regulation of the encrypted asset industry, which also drove a large influx of encrypted digital asset investment. At the same time, the funds of mainstream currencies such as Bitcoin were "sucked away".

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

In addition, since the market foundation of TRUMP coin itself is not solid, its price fluctuation is mainly driven by short-term market speculation. Therefore, once the market sentiment deteriorates and investors' risk appetite decreases, even if the project has nothing to do with it directly, when the market falls as a whole, 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 resonance of investors' emotions often cause the overall market fluctuations to affect each other. Therefore, there is indeed a correlation between the sharp drop in TRUMP coin and mainstream cryptocurrencies such as Bitcoin, but this relationship is more of a resonance of market sentiment and real-time dynamics, and not a closer technical correlation at another level. At the same time, investors should also understand that the main factors that really affect the price of cryptocurrencies are still market sentiment, regulatory policies and the overall economic environment.

Three TRUMP coin issuer keeps 80% of the shares

Risk: Is it cutting leeks?

TRUMP coin issuer keeps 80% of the shares!This distribution method is like keeping most of the cake for yourself and only giving investors a little cake crumbs. Of course, many investors are not happy, feeling that they are being treated as "leeks".

(I) Hidden dangers of the issuer retaining a large share

First, this coin distribution model where the issuer retains a large share does hide great risks. The project party holds so many tokens and can sell them on the market at any time. If they see the right opportunity and throw out 80% of the tokens in their hands, the market will collapse in an instant. The funds invested by investors who enter the market later may disappear overnight. This risk is not a joke. Second, the transparency of the TRUMP coin project is also a big problem. After all, the project party has not made it clear how to develop in the future, how to distribute tokens, and how to use funds. This uncertainty makes investors nervous and increases the risk of investment. Third, this model of the issuer retaining a share is not the first of its kind in the cryptocurrency circle. The capital structure of many similar "air coin" projects has shown this typical "prophetic model", and there are precedents: the project party used the celebrity effect to attract investors, and then cashed out at a high price and ran away. Will the TRUMP coin repeat the same mistake? Here is a question mark. 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 more sensible choices.

(II) Lessons from the hype of the "celebrity effect"

Using the "celebrity effect" to hype cryptocurrencies is no longer a new thing. The routines of those "celebrity coins" and "Internet celebrity coins" in the past are similar. They usually have the following characteristics:

1. Short-term surge and plunge: The "celebrity effect" is like a fire that can instantly ignite the price of the currency. But this fire comes quickly and goes quickly. Once the heat subsides, the price will plummet instantly like a roller coaster;

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

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

4. Lack of transparency: The project party always hides and does not disclose key information. 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 hype climax caused by the "celebrity effect" in the short term, but TRUMP coin is essentially a meme coin that lacks actual value support, and its price fluctuations are entirely dependent on market sentiment and speculation. As for whether TRUMP coin may repeat the previous problem of "using the celebrity effect to hype cryptocurrencies", it still needs to be comprehensively viewed in combination with the actual market situation and other factors in the future. If TRUMP coin continues to lack a practical project foundation and application scenarios, it is likely to face the risk of a sharp drop and bubble burst in the future.

Fourth What the lawyers have to say

The issuance of TRUMP coins has indeed set off a wave of "hype" around the world, but you have to know that the supervision of the beacon country is not a joke. Their SEC, CFTC, OFAC and other institutions have long set up many lines of defense for virtual currencies. If virtual currencies are identified as "securities" in the future, it is illegal not to register; if it involves anti-money laundering investigations, it will even cross 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.