Injective’s ‘supply squeeze’ clears with 99% vote – What’s next for INJ?

Injective will move forward with its aggressive deflationary plan. The proposal, dubbed “supply squeeze,” received unanimous approval, with 99.89% voting in favor, the blockchain said in a statement. 

The Layer 1 chain added, 

“The new chapter of INJ is live now to dramatically reduce the token supply, enabling INJ to become one of the most deflationary assets over time.”

The proposal was first floated on the 16th of January and aimed to offer a complementary but fixed solution to the INJ token’s community buyback program. 

According to the proposal, IIP-617, INJ’s total supply reduction rate would be doubled. In other words, the supply reduction would be increased by 100% as part of a “structural upgrade to INJ tokenomics.”

For the unfamiliar, Injective [INJ] debuted with a total supply of 100,000,000 tokens and serves as the governance token for the Injective ecosystem.

Injective’s annual inflation rate or emissions distributed as staking rewards are dynamic and fluctuate between 5% and 10% based on an 85% staking ratio. 

In the past, the chain’s deflationary plan involved using collected fees to drive token buybacks. Over 6.8 million INJ tokens have been removed from supply via the buyback program.

But the new plan takes it a notch higher. It will cut emissions by half and increase buybacks to tighten supply. 

Will the deflation plan boost INJ’s outlook?

However, the results and views on buyback programs across various chains, such as Hyperliquid [HYPE], Pump.fun, and Jupiter [JUP], have been mixed.

Some bill it as a “token value accrual,” while others, like Jupiter, see it as a waste of resources if the token’s price doesn’t rally. 

Whether INJ’s double approach will clear Jupiter’s doubts remains unclear. 

In the meantime, INJ tracked broader market sentiment rather than the bullish update.

It rallied 4% after the update but erased some of those gains at the time of writing as Bitcoin [BTC] dipped to $90K following U.S. President Donald Trump’s tariffs on Europe. 

Source: INJ/USDT, TradingView

After slipping below $5, INJ briefly dropped to December lows near $4.4 and may retest support or drop to $4.42 if pressure persists. 

Besides, the overall demand on the Futures market remained muted.

Over the past week, Futures CVD (Cumulative Volume Delta), or demand for INJ on the Futures market, became increasingly negative from the 15th of January and dipped even lower despite the ‘supply squeeze’ update. 

Source: Velo

In fact, even the Open Interest (OI) remained unchanged near $25 million despite the bullish tokenomics update. 

Taken together, these data sets showed that broader market sentiment overshadowed the positive INJ development. It remains to be seen whether the price will catch up later. 

Final Thoughts

• Injective approved a plan to cut its dynamic annual emissions, currently 5%-10%, in half.
• Speculative interest and demand remained low despite a slight 4% bounce after the positive update.