Crypto protocols are refining token buyback mechanisms to address inefficiencies in previous models, potentially increasing confidence and driving up token prices.

Executive Summary

Token buyback programs are evolving within the cryptocurrency space to address inherent timing flaws and enhance value accrual for token holders. New models focus on dynamic allocation and value-based triggers to improve capital efficiency and transparency.

The Event in Detail

Traditional token buyback strategies have been criticized for concentrating purchases during market peaks and reducing them during downturns. This reflexivity, as highlighted by an anonymous Raydium contributor, stems from models that tie buyback spending directly to protocol revenue. Jupiter Exchange, for example, allocates 50% of protocol fees toward repurchasing JUP tokens, spending approximately $50 million on JUP repurchases throughout 2025 after generating $102 million in revenue. Ethena Foundation executed a similar model through its $260 million buyback program via StablecoinX, allocating $5 million daily over six weeks to repurchase 83 million ENA tokens, representing 3.48% of the circulating supply.

Market Implications

Protocols are exploring dynamic allocation models that allocate higher buyback percentages when tokens trade below certain valuation thresholds, specifically FDV-based approaches. Time-weighted average price (TWAP) models trigger full buyback mode when the current price falls below the 30-day average. Hyperliquid demonstrated an aggressive implementation of this model, utilizing 97% of protocol fees to repurchase HYPE tokens, totaling 29.8 million tokens valued at over $1.5 billion.

Expert Commentary

The strongest argument for programmatic at-the-market buybacks is transparency and alignment signaling. A fixed percentage of protocol revenue creates clear, auditable value transfer without discretionary decisions from centralized entities. However, this transparency comes with a premium, as protocols forfeit optimal timing and execution in exchange for predictable, trustless value distribution.

Broader Context

Token buybacks are making a strong comeback in the cryptocurrency market, capturing the attention of traders and long-term holders alike. Successful buyback programs transform protocol fees into sustained buying pressure, gradually reducing the circulating supply and creating upward momentum for the token's value. Protocols like Sky stand out, burning 100% of the tokens it repurchases, removing approximately 2.2% of its total token supply. Aave approved a proposal to begin weekly buybacks of $1 million. Orca approved a $10 million buyback program also includes burning 25% of the total token supply. dYdX launched its first-ever buyback program, allocating 25% of net protocol fees to monthly buybacks.