Crypto projects are starting to realize that buybacks are a waste of money

There are two dumb things crypto projects do:

Buying back tokens (it's specifically dumb when the aim is to make price go up)

Burning tokens (this one is simply just stupid, doesn't matter if a token supply is 1T, leave it alone).

Now the reason I say that these are dumb things crypto projects do isn't because the ideas in themselves is dumb, it's because the market doesn't react to these things in any economically meaningful way, yet projects still do them.

Here's the truth I've come to realize that many people struggle to grasp: the market decides what is valuable and what isn't.

When you're running against the scoreboard of said market, that's just suicide.

Think about Bitcoin for instance, most TradFi companies called it a scam despite it being actively chosen by the market, and now, years later, it's worth $1.78T and the same companies are playing catch-up.

The markets decided Bitcoin was valuable and it's still adding blocks today.

The markets reject buybacks and token burns

It's worth noting that buybacks and burns don't always happen together, but sometimes they do, and it's an even more stupid thing crypto projects do.

Why should anyone believe that buying back $70 million worth of tokens and setting it on fire, is somehow valuable for a network or ecosystem?

How does burning money benefit an economy?

Part of growing an economy is capital injection to boost development and production, but when you burn the capital that should fund these things, what happens?

It's simple, you turn to debt, and devalue the economy in an effort to grow it, how pathetic right?

Here's when a token buyback would actually make sense: if a project buybacks tokens to boost liquidity, such buybacks makes sense.

Otherwise, capital should go towards incentivizing development.

When it comes to token burns, I can't really think of a reason it should happen. The obsession with limiting the supply of crypto assets doesn't come from a place of protecting value but power. Anyone who pays attention would see this.

The founder of Helium, a prominent DePIN project, recently announced that the project will stop buying back their tokens off the markets because said market doesn't seem to really care about it.

Also, the co-founder of Jupiter, a project that spent $70M last year in buybacks, is also floating the idea of redirecting the capital to something more productive.

These discussions are all happening on X and it's beautiful to see these projects wake up to what we've been discussing for a while.

The concepts of buybacks only make sense if they lead to meaningful value generation, otherwise, it's a misuse of capital, of which sometimes, is revenue a project should be using to fund developments that would actually attract external capital.

Posted Using INLEO