Triggered by Solana and Ethena — Crypto pivots from inflation to buybacks and supply cuts

An interesting shift in the crypto market landscape is currently unfolding. It goes beyond simple short-term price fluctuations; the industry is finally moving away from the old model of mindlessly printing and distributing tokens. Now, the prevailing trend is a fundamental improvement in supply and demand, where protocols use actual revenue to buy back their own tokens or tighten issuance to preserve value.

The era of record-breaking buybacks: Proving token value through revenue

In the stock market, highly profitable blue-chip companies often use 'share buybacks' as a key weapon to enhance shareholder value. It is a standard method to boost value per share by reducing the number of shares in circulation.

The crypto market has historically been the opposite. Inflationary models that indiscriminately printed and distributed new tokens to attract users were once taken for granted. However, crypto projects are now attempting to improve their fundamentals by adopting the buyback era, where tokens are purchased directly based on real-world revenue.

According to a Financial Times report citing data from blockchain analytics firm Allium Labs, crypto projects spent approximately $638 million on token buybacks this year, marking an all-time high. This is a 17% increase compared to the same period last year.

At the center of this trend are Hyperliquid, a decentralized derivatives exchange, and Pump.fun, a memecoin launchpad. These two projects alone account for over 90% of total buybacks, totaling approximately $570 million. The massive fee revenue generated directly by these services is acting as a solid floor to support token prices.

Ethena’s aggressive conditional buyback and Solana’s ultra-deflationary consensus

The restructuring plan announced by the Ethena Foundation is quite radical. They declared that they will use a staggering 95% of the protocol's net profit to buy back ENA tokens from the market. However, there is an interesting catch: this buyback program will only fully activate once the supply of Ethena’s stablecoin, USDe, reaches $7.5 billion. With current supply hovering below $5 billion, it requires about 50% more growth, but the move is receiving significant attention for signaling a strong commitment to directly link generated revenue to token value.

Around the same time, a historic vote was dramatically passed within the Solana ecosystem. Proposal 'SGP-0002,' which doubles the rate of Solana’s annual inflation reduction from 15% to 30%, passed with approximately 67% approval. It was a nail-biter, barely clearing the 66.67% threshold by just 0.33 percentage points. The outcome remained tense until the final moments of voting, turning into a dramatic finish as major validators like Kraken and Galaxy Digital flipped to 'yes' at the last minute.

The importance of this vote to existing holders is clear: it prevents the dilution of the tokens they already own by rapidly reducing the amount of new Solana entering the market. With this decision, the time required for Solana to reach its target inflation floor of 1.5% is significantly reduced from 5.7 years to 2.8 years. This effectively cancels the issuance of approximately 18.9 million Solana tokens that were scheduled to enter the market over the next six years, acting as a solid buffer against concerns of oversupply.

Crisis management is also evolving: DeFi’s bold 'emergency stop'

It’s not just tokenomics that are becoming healthier. The resilience of the DeFi ecosystem in dealing with sudden crises has also matured significantly. It is a far cry from the past, where platforms would helplessly watch funds vanish into hackers' pockets only to 'fix the stable door after the horse has bolted.'

Recently, Tectonic, a major lending protocol based on the Cronos chain, suffered a massive price manipulation attack worth approximately $75 million. The attacker inflated the price of the low-liquidity TONIC token by 100 times in just 20 minutes, intending to use it as collateral to borrow a huge sum. According to blockchain security firm CertiK, these types of bypass manipulations actually account for the majority of recent DeFi hacking incidents.

However, the Cronos network took the bold step of triggering an 'emergency stop' to halt the entire chain the moment the attack was detected. Thanks to this swift action, funds successfully moved to other chains like Ethereum were contained to around $6 million, preventing a massive catastrophe. It was a moment where proactive control, even if it cannot perfectly prevent all risks, shone through in minimizing damages.

What is the next signal to watch for?

The crypto market is moving beyond the phase of simply surviving by printing tokens and is now demonstrating new survival strategies. By focusing on value returns based on real revenue, active supply control, and swift crisis response capabilities, the industry is significantly strengthening its fundamentals.

The first signal we should monitor is the trend in USDe supply, the key metric for Ethena's buyback condition. Along with this, in the midst of macroeconomic uncertainty surrounding interest rate policies, it is time to watch with interest whether these improved token structures can prove their true worth by providing strong defense during market downturns.

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