dYdX to Use Part of Revenue to Buy Back Tokens Despite Analyst Criticism
Date: 2025-03-25 Author: Henry Casey Categories: BUSINESS
The decentralized platform dYdX has announced the launch of a buyback program for its DYDX token, allocating 25% of its monthly commission income to it. This decision was part of a strategy to strengthen trust and long-term sustainability of the project. According to an analyst at Route 2 FI, the exchange's annual revenue from commissions reaches $17.5 million, which means that at least $4.3 million will be spent on token buybacks annually.
The community is also discussing the possibility of increasing the buyback share to 100% of purely unlocked DYDX tokens and simultaneously reducing the emission by 50% starting in June 2025. This could elevate dYdX’s status as one of the most mature derivatives exchanges in the decentralized space. Following the announcement, the price of DYDX jumped 7.9%, reaching $0.726, according to CoinGecko.
However, not everyone in the industry shares the optimism surrounding such initiatives. According to a recent report from analytics company Messari, buybacks using protocol revenues are not able to maintain the stability of the token in the long term. Analysts warn that temporary price increases caused by buying pressure do not compensate for weak fundamentals.
In addition, when capital is spent on token buybacks, it turns into a potential loss - in the event of a fall in the price, it has to be sold at unfavorable prices. Messari cites examples of projects such as Raydium, GMX, Gains Network, and Synthetix, which spent millions on buybacks, only to see their tokens fall by 26-77%.
As more effective alternatives, experts recommend either aggressive growth investing or profit distribution among holders in the form of stable and liquid assets, as veAERO and BananaGun do.
Mason Nystrom, a junior partner at Pantera Capital, supported this point of view. He believes that protocol resources should be directed towards development and increasing fundamental value, rather than maintaining artificial demand. In his opinion, strategic growth investments will yield much greater results than programmatic token buybacks.
Meanwhile, interest in the fee switch mechanism - which involves active token buybacks and burning - continues to grow, sparking discussions about the future of decentralized finance.
