[Token Analysis] Buybacks do not create token value — the harsh truth proven by data

Cryptocurrency projects frequently adopt “buybacks” as a means of defending token prices. This approach seems intuitively reasonable—reducing the circulating supply should boost prices. But the actual data tells a different story.

Investing tens of millions of dollars with minimal impact

Jupiter invested about $70 million (approximately 970 billion Korean won) in buybacks. What was the outcome? Its token price is still down 92% from its historical peak. dYdX executed systematic buybacks funded by protocol revenue, with a drop of 88%. Clanker adopted an aggressive structure that allocates 80% of fee revenue to buybacks, but after fluctuating, the price ultimately returned to its original point.

These three projects differ in scale, funding sources, and execution capabilities, yet they share one commonality: buybacks failed to create structural value changes.

The essence of buybacks: value circulation rather than value creation

Buybacks are a value return mechanism. They are a way of redistributing existing value, not a tool for creating new demand.

In traditional finance, companies typically implement stock buybacks when there are few investment opportunities, which is a choice made by mature businesses that have exhausted growth options. The cryptocurrency space is different; projects initiate buybacks while still needing to cultivate products, users, and markets, often using this as a cover-up for weak demand.

Why $HYPE and $AAVE are different

Hyperliquid (HYPE) and Aave (AAVE) are often cited as examples where buybacks were effective. However, a deeper analysis of their structures reveals the causal relationship is precisely the opposite.

Both projects first achieved product-market fit (PMF), followed by generating substantial revenue. Buybacks were executed only after this point. It was not the buybacks that drove the price increase; rather, it was the already strong projects that executed buybacks. Buybacks are the result of success, not the cause.

What early teams lose by choosing buybacks

For early-stage projects, buybacks represent an opportunity cost. Every $1 used for buybacks also means:

$1 not used for team expansion

$1 not used for product development and deployment

$1 not used to extend the project’s lifespan

The factors that truly enhance token value lie elsewhere: actual usage, controlled inflation (release plans), structured liquidity entry, and continued holding after token generation events (TGE) are key.

Liquidity is fundamentally a coordination problem

The essence of liquidity crises is the failure of coordination among market participants. Buybacks do not solve this issue; they merely cover it up.

While short-term charts may be maintained, the real question—why is there no new demand entering—remains unresolved. Providing the team with the psychological comfort of “taking action” is closer to the actual function of buybacks.

Before considering buybacks, one should first ask: “Do people have a reason to buy our tokens?” If the answer is unclear, then buybacks are not the solution.