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The digital asset industry is adopting a familiar strategy from traditional capital markets: Crypto companies and groups have spent nearly $640 million since the beginning of the year buying back their own tokens. The move comes as part of an attempt to revive prices and demonstrate stability and confidence during a prolonged market slowdown.
The updated scope of buybacks, which stands at $638 million, marks a surge compared to the $545 million spent in the corresponding period last year, and a dramatic leap from just $366,000 spent in all of 2024, according to data from blockchain research group Allium Labs. Leading this trend are the derivatives exchange Hyperliquid and the meme coin creation platform pump.fun, whose combined spending accounts for nearly 90 percent of total buybacks in the market.
The waves of buybacks are occurring against the backdrop of a particularly challenging period for the crypto market, as some investors choose to abandon digital assets in favor of artificial intelligence stocks that are recording sharp gains.
Although prices experienced a slight recovery following a surprising intervention by the US Department of the Treasury in bond markets that undermined confidence in the dollar, Bitcoin remains about 38 percent below its peak level, while other popular tokens, such as XRP and Solana, show a plunge of about 60 percent.
For decades, public companies in the US and UK have regularly used billions of dollars to buy back their own shares as a way to boost prices and increase returns for shareholders. However, in the crypto world, token buybacks – which, unlike regular shares, usually do not confer economic or voting rights – were a rare phenomenon until now. The reason for this stemmed in part from Gary Gensler’s tenure as chairman of the US Securities and Exchange Commission, days when many executives were cautious about any move that could give crypto the character of a security and expose them to regulatory proceedings.
This picture changed under the Trump administration, as US regulators began taking a far friendlier stance toward the field. The regulatory shift helped executives feel comfortable launching buyback programs. The Hyperliquid exchange, for instance, led the trend by allocating 99 percent of its revenue from trading fees to buy back and burn its HYPE token. Since launching in December 2024, the company bought and burned $1.3 billion worth of tokens, leading to a 70 percent surge in the price of HYPE over the past year, bucking the general market trend.
Another player in the trend is the DeFi (decentralized finance) platform Sky Protocol, which bought back $26 million worth of tokens. Co-founder Rune Christensen noted that the platform generated revenue of more than $400 million over the past year, and that the buybacks of the SKY token were intended to ensure that token holders, who lead decision-making and voting on the blockchain, act in alignment with long-term success. Its token price recorded a modest rise of 5 percent over the past year. Conversely, Lido protocol announced in August an intention to execute regular buybacks to link the token price to the protocol’s success, following annual revenue reaching $40 million. However, Lido’s token plummeted by 71 percent over the past year and traded at all-time lows.
Similar to the stock market, there is significant uncertainty regarding the degree of impact buybacks have on token prices. Decentralized exchange Jupiter has spent nearly $14 million buying back its tokens since the beginning of the year, but their price plunged 55 percent over the past year. Platform Chainlink also executed buybacks, but the value of its LINK token was cut in half. Due to the lack of effectiveness, the Helium platform even decided to halt its program in February, as co-founder Amir Haleem explained: “It seems the market doesn’t care about such moves, so we will stop wasting the money.”
Source: www.jpost.com