In 2025, over 15 cryptocurrency projects have announced or already executed token buybacks. Decentralized finance (DeFi) projects are particularly active, with buybacks ranging from millions to tens of millions of dollars. However, the execution methods and market reactions vary significantly across projects.

# Differences Between Token Buybacks and Share Repurchases

A token buyback involves repurchasing its issued tokens. This strategy is grounded in traditional finance principles where companies buy back shares to signal undervaluation and boost earnings per share. Yet, token buybacks are inherently different from share repurchases. Share buybacks in the stock market are subject to legal regulations and clearly reflected in financial statements. In contrast, crypto buybacks are at the discretion of the project and lack clear disclosure standards. This makes it difficult to verify actual buybacks or assess the potential for re-releasing locked tokens. Moreover, while shares represent ownership, tokens’ value varies based on governance participation, utility, and other functionalities, affecting investor expectations and market impact.

# Buybacks Proliferate in DeFi

The DeFi sector is spearheading the buyback trend. Projects like dYdX and Jupiter have announced buyback plans, followed by Hyperliquid, Ether.fi, Raydium, Aave, and Arbitrum. Public blockchain Berachain plans token repurchases following its seed and A rounds, and Jito is discussing buybacks and rewards. Other fields, including AI, security, and memes, are also adopting this strategy.

Buyback scales vary by project. Raydium has acquired over 55 million RAY tokens using a portion of liquidity pool trading fees, while Jupiter allocates 50% of protocol revenue for JUP buybacks. Aave plans weekly $1 million buybacks over six months, and Virtual Protocol will buy and burn $40 million worth of VIRTUAL tokens. Movement, impacted by Binance’s market maker investigation, will buy $38 million worth of MOVE tokens over three months.

The buyback methods are diversifying. dYdX uses 25% of net income monthly from March 2025 to repurchase tokens in open markets. Aave proposes a staking module convertible to buybacks and fees. Offchain Labs, the R&D team for Arbitrum, is pursuing strategic ARB token buybacks in open markets and other ways. Hyperliquid burned over 189,000 HYPE tokens post-TGE (Token Generation Event). Aerodrome has consistently bought and burned over 100 million AERO tokens since launch. Jupiter locks repurchased tokens or uses them to support liquidity pools.

# Mixed Market Reactions

Market reactions to buyback plans differ widely. Some projects experienced token price rebounds. For instance, DYDX saw its token rise from $0.65 to a peak of $0.76 on March 24, the day of its buyback announcement. Similarly, Jupiter’s token surged from a daily low of $0.89 to a high of $1.28 following its January 26 announcement.

However, such price increases are rarely sustained. Projects like GMX, SNX, and GNS saw their tokens trade below purchase prices despite significant buybacks. Market experts attribute this to multiple factors, including project performance, transparency, financial health, market sentiment, and macroeconomic conditions. They argue that reducing token supply alone doesn’t guarantee a price increase.

# Is it a Recovery Strategy or Short-term Liquidity Fix?

Opinions are divided on token buybacks. Some experts see them as a sign of financial health and increased investor confidence. Crypto influencer @qinbafrank believes the market’s maturation amid the exit of smaller coins is creating a more positive environment. He advocates for reinvesting part of the profits back into ecosystems to enhance token value, seeing this as a potential catalyst for positive change in the entire crypto market.

Conversely, skeptics argue that buybacks without real revenue generation or technological advancement are merely short-term liquidity plays. Messari analyst @defi_monk contends that buybacks have no direct correlation with price hikes and may lead to capital misallocation. He stresses that token prices are driven by growth strategies and narratives rather than mere buybacks. Bankless also warns that buybacks might be misused as exit strategies for early investors rather than fostering new investments.

# Transparency and Sustainability at the Forefront

Transparency and sustainability are key issues. Buybacks can signal market confidence, particularly in downturns, helping to calm community concerns. However, failure to execute promised buybacks or lack of effectiveness can erode trust. Some projects have been criticized for misleading price surges or moving tokens to controlled wallets instead of burning them, emphasizing the need for transparent execution.

Buybacks also entail risks. Frequent or opaque actions can lead to market manipulation accusations and potential regulatory scrutiny, particularly in the unregulated digital asset market. Excessive buybacks reducing circulating supply could result in trading slowdowns, decreased market depth, and liquidity issues. Projects with limited revenue streams or facing prolonged downturns may find buyback sustainability threatened.

# Buybacks: A Double-edged Sword

In the digital asset market, token buybacks are a double-edged sword. They can aid in restoring project trust and stabilizing prices but are unlikely to be effective without considering macroeconomic conditions, project fundamentals, financial status, and transparency. Only buybacks grounded in substantial revenue, transparently executed, with clear objectives, are likely to receive positive market reception. Investors must consider the holistic sustainability and economic structure of projects rather than relying solely on numerical data.