Andy & Robbie: Do Token Buybacks Actually Work? (Full Data-Backed Breakdown)

Token buybacks have been the dominant mechanism used by the small fraction of crypto projects that both generate meaningful revenue and return any of it to token holders. Robbie estimates only about 10% of token projects that raised money have found product-market fit, and of that group roughly half pass revenue to equity or labs corporations rather than to the token itself, leaving approximately 5% of all token projects that have revenue and direct some portion back to the token.

Tokens with active buybacks, specifically Pump.fun, Hyperliquid, and Lighter, have been the best performers over the last six to twelve months. Andy qualifies this by suggesting the outperformance may be a bear market phenomenon, with buybacks functioning as a price floor protection mechanism rather than a universally superior strategy across all market conditions.

Luca Presperi offered a corporate finance framework for when buybacks are appropriate. The core principle is that you should buy back tokens when the return on reinvesting capital internally falls below the hurdle rate investors require from the token. In rational markets with high return on equity you should invest rather than buy back, in bearish markets with mid return on equity you should buy back, and in rational markets with low return on equity you should also buy back. In manipulated markets the correct capital allocation decision is unclear. Luca notes that token prices are distorted by insider activity, low float, and easy manipulation, making standard fair-price calculations largely irrelevant, and that it is a warning sign if small high-growth startups with negligible revenues cannot deploy capital internally at high return rates.

The best time to execute buybacks is identified as the beginning of a bull market when sentiment is apathetic and return on equity is very low. As a bull market matures, return on equity rises through narrative, product launches, and hires, while the potential upside from buybacks shrinks. The market is currently rewarding programmable daily buyback flows over arbitrary or discretionary buyback flows, attributed to a foundational trust deficit in the industry. Hyperliquid is cited as having set the standard, and Pump.fun's introduction of programmable daily buybacks is noted as a turning point in market structure.

Paul, the CEO of Morpho, argues that projects doing buybacks are not ambitious enough and sacrifice 10x to 1000x growth potential for gains of only 5% to 10%. Robbie's counter is that value accrual to the token is imperative but that buybacks are not the only mechanism to achieve it. Direct stablecoin dividends paid to token holders have not been widely adopted, likely because paying cash to token holders implies the token is a security, making regulatory exposure a probable deterrent.

Robbie argues that if a founder believes dollars are better spent on growth than on token value accrual, that founder should not have launched a token at all, and notes that in 99% of digital finance use cases tokens are unnecessary to the ultimate user experience. He predicts some tokens may be clawed back and swapped for tokenized equity, or teams may rescind current tokens and reissue tokens representing actual company equity. Future token launches in the next bull cycle are predicted to more likely take the form of tokenized equity with a genuine claim on company assets rather than tokens without equity rights.

There is an acknowledged tension between treating buybacks as a programmable daily mechanism versus acting as a directional hedge fund timing the market. Because The Rollup does not have a token, the hosts illustrate the opportunity cost argument with a hypothetical where capital equivalent to an 80,000 to 120,000 dollar annual hire invested in Zcash at 400 dollars before a run to 10,000 dollars would yield approximately 3 million dollars. The broader structural observation is that too many projects launched tokens when they should not have or launched them too early, and that companies which have not yet launched a token and still have capital remaining hold a structural advantage from having waited out the bear market.