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Crypto projects have started a token repurchase trend. Is this a good way to save the market or a capital illusion?
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Judging from the market reaction, the repurchase plans of some projects have had a positive impact on the price of coins. From the highest increase since the release of the repurchase plan, Aave, MyShell and Virtuals Protocol have seen relatively significant increases. However, about one-third of the projects have seen a maximum increase of less than 10% after the announcement, and the market reaction is relatively flat. Of course, this differentiation may be related to the scale of the repurchase, the execution, the fundamentals of the project, and the overall market decline.
The strong liquidation of small coins in the past year is actually forcing the market to evolve further: either focus on the real value of innovation; or give up the fantasy of high valuation in the primary market and start from a low market value, so that the secondary market can also enjoy the dividends of growth instead of just analyzing the market; or projects with revenue will start to inject part of the profits and income into the token economic model to increase the value of each coin. This is a welcome start for the currency market.
When all projects regard buyback as a solution to token price, buyback loses its meaning. It is more like seeking exit liquidity for shipment. Mindless buyback cannot solve the problem of sustainable development and growth. Buyback should serve the long-term development vision of the project.
The key to price fluctuations is revenue growth and narrative. Repurchase itself cannot determine the long-term trend. When the market is good, the project party may spend money to repurchase at high prices, resulting in extremely high costs. However, when the price of the currency falls and the income becomes worse, there is not enough money on hand, and there is no capital to innovate or adjust the strategy. The price of the currency will continue to fall. In the final analysis, what the project party should really do is to invest in growth and value distribution, rather than burning money at the wrong time.
Whether repurchase can be an effective means to boost the market or just a capital game, perhaps only time can tell. But for investors, the effect of the repurchase plan is not achieved overnight. In addition to paying attention to the repurchase amount, they should also pay attention to the long-term planning and actual implementation of the project.
Hyperliquid, Raydium, Jupiter, Aave, Aerodrome, and Virtual Protocol have relatively strong buybacks
Buybacks have nothing to do with price movements
Projects should focus on either full growth or distributing real value to holders in the form of stablecoins/mainstream coins.
