Do Token Buybacks Work?

When speaking to builders at conferences, we realized that there are few easy guides regarding on-chain liquidity management for early stage teams. As LPs and on-chain market makers, we see the same mistakes overlooked until they become costly errors. Most CEX market makers also don’t seem to provide much guidance on how to manage on-chain liquidity.

Heavendex AMM sets up pools where trading fees all go towards buying back the token. Its own token $LIGHT also participates in these buyback systems.

TLDR: Scarcity =/= Desirability

Buying back tokens reduces supply. With less supply, one would think demand increases, and therefore value increases. Unfortunately, many tokens in crypto do not have an intrinsic base level of demand. Much of demand comes from attention and mindshare, which is often what most projects focus on.

As the industry matures, stronger fundamentals will make buybacks more effective long term. We’re already seeing projects experiment with “flywheels” (protocol-level buybacks) designed to tie fundamental revenue to token value. Whether these efforts work remains to be seen. In the meantime, buybacks are often used as temporary relief for negative sentiment or as short-term pumps—with mixed success.

What Do Token Buybacks Actually Do?

Before diving into crypto examples, let’s look at Web2 companies for clues.

In public markets, buybacks are used to:

• Increase stock price

• Create scarcity

• Reward shareholders

• Offload extra cash

Apple is the poster child—spending over $650B on buybacks since 2012 and reducing share count by ~40%. This worked because Apple’s earnings kept growing. Compare that to GE, IBM, or some oil majors where buybacks couldn’t stop declines because fundamentals weakened.

Apple reduces outstanding circulating shares by over 50% from 2010-2019 through a series of aggressive programmatic buybacks. Stocks rose in the same time period from $11/share to $40/share, a 300% increase.

Why stock buybacks are a stronger signal than token buybacks:

Will crypto begin adopting EPS as a method of valuing tokens?

• Share reductions mechanically raise EPS (earnings per share). Investors obsess over EPS and valuation multiples.

• In crypto, there’s no EPS equivalent. Price is driven more by attention, liquidity, and narratives than financial comps.

• Programmatic buybacks in crypto also face the problem of cyclical revenues that follow bull/bear markets.

The Founder’s Checklist: Should You Buy Back?

• Do you have recurring protocol revenue? (Or are you burning runway?)

• Is your treasury strong enough to fund buybacks without killing growth?

• Are you pairing buybacks with fundamentals (product launch, partnerships, adoption)?

• Is your goal price support or just optics?

If the answer leans “optics,” you’re probably just fueling an exit pump.

Types of Token Buybacks

Different buybacks cater to different situations.

What Happens Before, During, and After

• Announcing the buyback: Sometimes the market reaction comes just from the announcement (“pricing in” the news).

• Executing the buyback: In some cases, execution can cause a selloff—exit liquidity for holders who were waiting to sell.

• Programmatic buybacks: Seen as best-in-class, but inconsistent when revenue is cyclical. Raydium has burned over $175M in RAY, yet price still follows market attention cycles.

• Overpaying: If buybacks are executed at high valuations, it drains more treasury than necessary. Algorithmic or volume-weighted approaches could help smooth this.

Case Studies

• Hyperliquid ($HYPE): 97% of its DEX revenue contributes to approximately $3M in daily buybacks with $650M projected annual revenue. Strong revenue combined with a outlandish buyback program, HYPE has been often touted as the most successful buyback program. (The question then becomes when or if the foundation will sell?)

HYPE buybacks compared to Web2 buybacks, consistent with Microsoft in terms of MCAP/FDV to buyback ratio of 82x. The size of the annual buyback compared to the circulating supply.

• Pumpfun ($PUMP): On-chain buyback and burn of 118,351 SOL sparked a 20% surge, but price retraced within a day. Scarcity didn’t equal desirability—the competitor BONK kept taking mindshare. (Pump is now leading market share once again, $PUMP has yet to react Aug 22, 2025).

• Raydium ($RAY): Programmatic buybacks plus experiments with single-sided SOL liquidity walls. The latter creates price floors without chasing pumps—arguably a healthier approach.

An enormous passive buyback through single sided liquidity at $2.89

• BNB burns: The largest, most consistent buyback/burn model in crypto ($35B in BNB burned programmatically based on CEX revenue). Works because Binance generates billions in fees, funding sustainability.

• MakerDAO surplus auctions & burn: Protocol revenue used to purchase and burn MKR

Buybacks risk being unprofitable due to market pullbacks. Treasury management systems need to be in place to manage ROI.

Investor’s View: With What Money?

Smart money looks past the headline. The hierarchy of signals is:

1. Funded by recurring revenue → strong

2. Programmatic, tied to fees → medium

3. Opportunistic, treasury-funded → weak

4. One-off burns, draining runway → bearish

Buybacks funded by protocol revenue are bullish. Buybacks that cut into runway are red flags.

A $5M FDV Solana project manual buyback program (Each orange line is a buyback of 0.5% of total token supply) . The portfolio value is up 4x from the buyback which the project now uses to actively manage liquidity.

The 3 Rules of Effective Token Buybacks

1. Must be funded by sustainable revenue (not one-time treasury burns).

2. Must be paired with fundamentals (product launches, partnerships, adoption).

3. Must be transparent & predictable, so holders build confidence rather than dump into short-term spikes.

Final Word: In equities, buybacks amplify fundamentals. In crypto, buybacks can create scarcity—but scarcity alone doesn’t equal desirability. Until protocols build sticky, recurring revenue and demand-side utility, buybacks are mostly narrative tools. Pair them with real fundamentals, and they can be a powerful signal. Use them as optics, and they’ll just fuel someone else’s exit.

If you are looking to conduct programmatic buybacks, or have questions about treasury management, I'd love to talk to you in DMs！

Other Examples:

$RAY Buybacks vs Price Action July 2022-July 2025

$PUMP Buybacks v Price Action July 17-Aug 4

PUMP team's non-programmatic buybacks overlaid with price.