Should Crypto Projects Redirect Buyback Funds to Growth Incentives?

The crypto industry's maturation has sparked a critical debate: Should projects prioritize returning capital to tokenholders via buybacks or reinvest those funds into growth incentives like R&D, marketing, and partnerships? This question cuts to the heart of strategic capital allocation and its impact on token performance. As projects increasingly adopt profit-sharing models akin to traditional corporations, the tension between short-term value creation and long-term innovation has come to the forefront.

The Case for Buybacks: Signaling Strength and Scarcity

Buybacks have surged in popularity, with 64% of revenue from 12 major crypto projects allocated to tokenholder distributions in 2025. This trend reflects a shift toward financial discipline and transparency, as projects use buybacks to signal confidence in their ecosystems. For instance, Hyperliquid's Assistance Fund, which allocated 97% of trading fees to repurchasing $HYPE tokens, has acquired over $1.3 billion worth of tokens since January 2025. By August 2025, the project had repurchased 28.5 million tokens, reducing circulating supply and driving price appreciation. Hyperliquid further proposed burning 13% of its total supply, reinforcing scarcity and long-term value.

Such strategies can create immediate price momentum. Aave's recurring $50 million annual buyback program, for example, initially drove a 50% price surge in 2024. However, the token later declined from an eight-month high of $367, and the program incurred a $1.7 million loss for the Aave DAO. This highlights a key risk: buybacks may lack sustainability if funded from treasury reserves rather than recurring revenue.

The Case for Growth Incentives: Sustaining Innovation

While buybacks offer short-term price support, critics argue that reinvesting in growth incentives is essential for long-term innovation. A Messari analysis of 10 DAOs found that 77% of treasury outflows were directed toward product and growth initiatives, compared to just 23% for community and operations. This suggests that projects prioritizing R&D and marketing may build more resilient ecosystems.

Consider Jupiter Exchange, which allocates 50% of protocol fees to buybacks but has faced questions about their efficacy. Its co-founder recently suggested redirecting capital to user growth and incentives, noting that JUP's price had fallen 89% from its all-time high despite $70 million spent on buybacks. Similarly, Helium's CEO halted HNT buybacks in favor of operational growth, emphasizing that "buybacks are not a substitute for real demand."

Token Performance Metrics: Mixed Results

The data on token performance is mixed. Hyperliquid's $HYPE token has seen robust appreciation, with its price surging to over $50 in August 2025 amid aggressive buybacks. Aave's AAVE token also rose 72% post-buyback announcement in 2025 according to Cryptorank. However, other projects like JUP, RAY, and ETHFI showed no meaningful gains, with some tokens dropping below initial levels according to Cryptorank.

This variability underscores the importance of context. Buybacks work best when paired with strong fundamentals. Hyperliquid's success, for instance, is underpinned by record-breaking trading volumes. Conversely, projects lacking verifiable revenue or utility often see buybacks fail to translate into sustained price action according to Cryptorank.

Strategic Considerations: Balancing Capital Allocation

The optimal approach likely lies in balance. Keyrock recommends adaptive models that adjust spending based on market conditions, such as trigger-based buybacks that combine flexibility with discipline. For example, Hyperliquid's treasury-funded buyback model allows it to accumulate tokens for future initiatives, while Raydium and Sky focus on permanent token burns to create lasting scarcity according to DWF Labs.

Mature projects with stable revenue-like Hyperliquid-can afford to prioritize buybacks as a form of profit-sharing. Newer projects, however, may benefit more from reinvesting in R&D and marketing to drive adoption. The broader industry trend, as noted by Galaxy's Q3 2025 venture report, shows a concentration of capital in late-stage projects, with blockchain services and DeFi leading in funding. This suggests that innovation and enterprise integration are becoming key drivers of value, even as buybacks dominate headlines.

Conclusion: A Nuanced Approach

The debate over buybacks versus growth incentives is not binary. While buybacks can signal financial strength and provide short-term price support, they must be paired with sustainable revenue streams and strong fundamentals. Conversely, reinvesting in R&D and marketing can foster long-term innovation but risks short-term tokenholder dissatisfaction.

Projects must tailor their strategies to their maturity, market conditions, and ecosystem goals. For Hyperliquid and Aave, buybacks have proven effective in signaling value and aligning tokenholder interests. For others, redirecting funds to growth incentives may be the key to capturing new markets and sustaining innovation. As the industry evolves, the most successful projects will likely adopt hybrid models that balance capital preservation with strategic reinvestment.