TLDR:
- Projects with active buybacks experience similar declines as those without them during bearish markets
- Hyperliquid’s daily unlocks of 216,000 HYPE tokens significantly overwhelm its 80,600 token buyback capacity
- Buyback effectiveness depends entirely on favorable market conditions, reversing during crypto downturns
- Token unlock schedules create structural selling pressure that even large buyback programs cannot overcome
Token buyback mechanisms have emerged as a popular strategy among cryptocurrency projects seeking to create value for holders.
However, a recent analysis from CryptoRank.io challenges the effectiveness of this approach, particularly during unfavorable market conditions.
The research examines why buybacks often fail to deliver sustainable value despite their theoretical appeal and widespread adoption across the industry.
Market Conditions Determine Buyback Success
The fundamental weakness of buyback programs lies in their dependency on favorable market environments. CryptoRank.io points out that protocols with active buybacks and low price-to-earnings ratios experience declines similar to those of projects without buybacks during market downturns.
The analysis poses a critical question: “Why, when bad market conditions appear, do projects with buybacks and a low P/E ratio fall just as much as those without buybacks?”
Data from the past three months shows significant price drops across most protocols with the highest daily buyback volumes, with only two exceptions maintaining stability.
The ORE token exemplifies this trend, having declined almost 90 percent since its token generation event despite announcing buybacks on October 22, 2025.
CryptoRank.io observes that almost all tokens are sliding due to bad market conditions and crypto’s dependence on macro and geopolitical factors.
The analysis highlights a concerning pattern whereby buyback announcements have become commonplace, even among projects generating minimal daily fees.
The research notes that market participants started hearing mechanism announcements from nearly every second project, including those with just $100 in daily fees.
Many tokens experience short-term gains following these announcements, yet the article warns that “the thing that should bring value turns into another possibility to make retail buy and then dump on their heads.”
Traditional market factors continue to dominate price action regardless of buyback programs. The bearish cycle reverses the intended flywheel effect entirely, as the analysis explains: “people leaving the market > less protocol usage > less fees > less buybacks > less buying pressure on token.”
Token Unlocks Overwhelm Buyback Programs
The Hyperliquid case study demonstrates how token unlock schedules can neutralize buyback efforts. According to CryptoRank token unlock data, approximately 216,000 HYPE tokens have entered circulation daily since November 29, 2025, with this schedule continuing for three years.
Meanwhile, the project’s buybacks currently purchase around 80,600 HYPE tokens daily, worth approximately $1.7 million.
This imbalance creates a structural problem where daily unlocks of $4.73 million significantly exceed buyback capacity.
The analysis explains that “if more than 37% of that daily unlock becomes real sell pressure, buybacks lose on flow even before you count other sellers.”
CryptoRank.io describes the situation bluntly, stating that buybacks “are just burning funds” under these circumstances.
The research emphasizes that vesting schedules lasting three years mean buybacks will have almost no effect except for reducing a small amount of emissions compared to unlocks.
This creates solid selling pressure that buybacks can only reduce slightly, even for projects deploying the largest amounts of funds to purchase their tokens.
The conclusion states clearly that “buybacks can rarely be named a value adding mechanic, as they work mainly when the market is overall good.”
Revenue declines compound these challenges, as Hyperliquid’s average daily fees have decreased approximately 30 percent since late October.
However, the analysis acknowledges that “Hyperliquid remains a strong project with solid PMF and growing even in this type of market.” The final question posed challenges the entire premise:
“If buybacks cannot help even in this situation, can they help at all?”
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