Token Buybacks: The Hard Truth And Why Projects Should Stop

GM, everyone.

Today, we are going to tear apart a topic that is absolutely sizzling in the crypto world right now: Buybacks.

The industry seems obsessed with them. Every time a protocol announces a buyback, the token price usually shoots straight up. The reason is pretty simple: buybacks create steady demand for the token, and theoretically, that pushes the price higher. The logic is: More buybacks = Higher price.

But hold on a second. Is it really that simple? Or are we getting played by surface-level numbers?

Lately, Crypto Twitter has been on fire with debates about whether buybacks actually work. It all started with a tweet from Amir, the founder of Helium. He shared a brutal truth: their buybacks didn't really help the $HNT ( ▼ 1.1% ) token price. In fact, HNT is still down 80% in 2025.

So, they decided to stop them, basically calling it a waste of money.

That comment hit a nerve. Soon after, the co-founder of Jupiter jumped in and agreed. Many DeFi projects have seen their tokens drop hard over the last year, even while spending millions buying them back.

So, we figured it’s time to ask the tough questions: Should protocols even be doing this? Do real-world startups do this? And should you invest in DeFi projects that are burning cash on buybacks?

Let’s dive in.

The Core Problem with Crypto Right Now

Before we talk about token buybacks, we need to step back and look at the elephant in the room: Tokens.

There is a massive disconnect between how well a protocol performs and the price of its token. This gap is exactly why big "real world" money is still sitting on the sidelines.

In traditional markets, it's simple. If you buy Apple stock, you own a piece of Apple. It’s backed by law. But in crypto? Holding 1% of a token usually just gives you voting rights. You don't legally own the profits or the assets.

But the bigger problem? There are no new buyers.

Most of the money in crypto right now is just old capital. It’s the same money jumping from one trend to the next. The industry is struggling to bring in fresh cash. Why? Because most protocols put zero effort into making it easy for new investors.

To understand a crypto project, you have to dig through messy data yourself. In the stock market, you get audited reports and clear guidance. In crypto? Good luck.

So, how do protocols try to fix this lack of demand? Buybacks.

Instead of fixing the real business or getting new users, they use their revenue to buy their own token. They do this even if they aren't profitable, or if the token is already overpriced. It’s a lazy fix.

The Ugly Truth About Token Buybacks

Before we wrap this up, we need to talk about three massive red flags that nobody else seems to want to mention.

These are the things that keep us up at night when we see a "Buyback Announced" headline.

1. You Might Be The Exit Liquidity

Here is a question almost nobody asks: When a protocol buys back millions of dollars of its own token, who are they buying it from?

For every buyer, there has to be a seller.

The retail crowd (that is us) usually sees the news and thinks "Awesome, price go up!" so we hold or buy more.

But the big whales? The early investors who got in for pennies? The venture capitalists who have millions of tokens unlocking?

They see something very different. They see a massive pile of cash sitting there, ready to buy their bags without crashing the price.

So while you are cheering for the green candle, the insiders might be quietly using that buyback demand to cash out and leave the party.

If the price doesn't skyrocket after a buyback, that is usually why. The buyback pressure was just enough to absorb the whales selling. Don't be the one left holding the bag.

2. Painting A Target On Their Back

In the traditional world, if it walks like a duck and quacks like a duck, it is a duck.

In the financial world, if a crypto token pays dividends and does buybacks just like a stock, the regulators (like the SEC) will probably treat it like a stock.

And right now, that is a dangerous game to play.

When a protocol acts exactly like Apple or Microsoft by returning profits to holders, they are basically waving a giant flag that says "Hey regulators, look at me!"

This creates a massive hidden risk. If the regulators decide that the token is an unregistered security because of these buybacks, the whole DeFi project could face lawsuits, fines, or get delisted from exchanges.

So while a buyback feels good today, it might be the very thing that gets the project in trouble tomorrow. We prefer projects that stay under the radar and focus on building, not poking the bear.

3. The "I Am Out Of Ideas" Signal

Let’s be real for a second.

Why do Amazon $AMZN ( ▲ 2.63% ) , Google $GOOGL ( ▲ 0.39% ) , and Tesla $TSLA ( ▼ 0.99% ) rarely do dividends or buybacks in their early years? Because they have better things to do with their money.

They know that if they spend $1 million on new tech, they can turn it into $10 million later. That is what growth is.

When a crypto founder decides to give money back to token holders, they are silently admitting something painful:

"I have no idea how to use this money to grow the company anymore."

It is a signal that innovation has stalled. Instead of hiring more engineers, building a new chain, or launching a massive marketing campaign to get a million new users, they are choosing the easy way out.

For a 50-year-old bank, that is fine. But for a cutting-edge crypto technology that is supposed to change the world? That is not "mature." That is just lazy.

We want to invest in builders who are hungry to grow, not founders who are ready to retire.

Do Traditional Companies Do Buybacks?

To see if this makes sense, let's look at what successful real-world companies do.

But first, let's be clear: when we talk about Apple $AAPL ( ▲ 1.12% ) or Amazon, we are talking about trillion-dollar giants. They are in a totally different league than a crypto startup.

Here is a fun fact: The biggest tech companies in the world waited an average of 23 years before they started buybacks or paying dividends. By the time they did, they were worth hundreds of billions.

The message is clear: They focused 100% on growth before they ever thought about sharing profits.

Now, let's look at startups. Do non-crypto startups do buybacks? Almost never.

Why? Because startup investors know the game. They know the goal is growth. You take every dollar you make and put it back into the company to make it bigger. You only share profits when you literally run out of ways to spend money on growth.

This is where crypto gets it wrong. Investors here want quick cash. They pressure founders to deliver short-term pumps instead of building a long-term business.

Good vs. Bad Token Buybacks: Real Examples

Let's look at some real examples to see who is doing it right and who is getting it wrong.

PumpFun

PumpFun $PUMP ( ▲ 7.2% ) is the memecoin factory on Solana. Their numbers are insane. They are making around $35 million a month.

Even though they are new (launched in 2024), they are sitting on a mountain of cash-estimated at over $1.5 billion.

In this specific case, buybacks make sense. Why? Because they have too much money. They can literally afford to use 100% of their revenue to buy back tokens without hurting their business. Plus, their token looks cheap compared to how much cash they have.

Verdict: Smart move.

Helium

Helium is a different story. They use a "buy-and-burn" model.

But here is the catch: Helium’s business model relies on printing new tokens to reward people for running hotspots.

In 2025, Helium made $9.5 million in revenue. Not bad. But... they issued $48 million worth of new tokens as rewards.

They are spending way more than they are earning. So, their buybacks aren't really "sharing profits." It’s just damage control to try and eat up some of the inflation they created. If your business model forces you to constantly print tokens that lower the price, buybacks are just a band-aid.

Verdict: It's a sign of a negative cash flow loop.

Jupiter

Jupiter $JUP ( ▲ 10.61% ) , the super-app on Solana, is spending about 50% of their revenue on buybacks.

The problem? We don't know how big their savings account (treasury) is. They have bought a lot of other companies and have a big team. If our math is right, their treasury might be under $60 million. That sounds like a lot, but for a major tech DeFi projects, it's not a huge safety net.

Spending so much cash on buybacks might limit their ability to jump on big opportunities in the future. We think hitting pause on buybacks to save up cash would be the smarter play.

Verdict: Risky. Better to save cash for growth.

Sky (formerly MakerDAO)

Sky $SKY ( ▲ 3.47% ) does something interesting. They use a fixed amount of money to do buybacks and give those tokens to people who stake.

They are making about $170 million in profit a year, so they can easily afford their buybacks ($300k a day). This gives stakers a nice 15% return.

The downside? You have to pay taxes when you claim these rewards. Also, only stakers get paid-everyone else gets nothing.

However, we like that they are using actual profit. It would be even better if they adjusted the buyback amount based on the token price (buy more when it's cheap, less when it's expensive) rather than a fixed amount.

Verdict: Solid, but could be smarter.

Final Thoughts & What You Should Do

Founders might say buybacks don't move the price, but the real issue is the market structure. We have no new people coming in.

If a DeFi projects is the only one buying its own token, that’s not sustainable.

Imagine two protocols:

• Protocol A uses its profit to do buybacks.

• Protocol B takes that profit and reinvests it to build new features and steal customers from Protocol A.

Who wins in 5 years? Protocol B. Every time.

Buybacks do not give you a competitive edge. They do not grow your market share. And for a startup, market share is everything.

Startups should only think about buybacks when they are massive, boring, and have no more ideas on how to grow.

So, the next time you see a project announce a buyback, don't just blindly buy. Take a step back. Ask yourself: "Did they run out of ideas?"

Remember 2012? When Apple finally announced dividends, the market actually dropped. Why? Because investors realized Apple was admitting it was no longer a crazy high-growth startup, but a mature, slower company.

In investing, sometimes "good news" is actually a sign to look for the exit.

Key Takeaways

• Look Deeper: Don't let buyback headlines fool you. Look at the project's actual cash flow.

• Growth First: A startup should use its money to get bigger and beat competitors, not to pay existing holders.

• Cash is King: Buybacks only make sense if the project has an insane amount of extra cash (like PumpFun).

• Revenue vs. Profit: Learn the difference. If a project has high revenue but higher costs, buybacks are a bad idea.

• The Red Flag: If a project has to constantly buy back tokens just to fight the inflation they created, their economic model might be broken.

⚠️ Disclaimer: This newsletter is for informational purposes only, just for fun and knowledge. This is not investment advice. Your money, your responsibility!