Protocols are buying back, but tokens are still falling. The most direct sell pressure in the market comes from unlocks and token inflation—combined, these forces are far greater than the money spent on buybacks. Hyperliquid has cumulatively bought back over $1 billion worth, burning 462 million HYPE tokens, with a cumulative value of about $1.27 billion. Yet the HYPE price still dropped from its high of $70 in late July to $52.4, a decline of around 30%.
Step 1: Do the Math—Buyback Volume vs. Sell Pressure
What to do: Compare the scale of buybacks with the actual sources of sell pressure to see which direction has more capital flow.
How to do it: Using Hyperliquid as an example, break down the sell pressure sources:
Buybacks: Cumulative buyback of about 9.8 million HYPE, costing roughly $364 million. The average monthly buying volume is more than double the team's selling volume.
Main sell pressure from whales and ETF outflows: Multicoin Capital unstaked a large amount in July and moved it to exchanges, with one sale of 607,000 HYPE worth $37 million; a16z also sold high and bought low, reducing over $30 million in July. The HYPE spot ETF has seen continuous net outflows since early July, averaging about a million dollars a day, a sharp contrast to the earlier massive inflows.
Although buybacks happen every month, their amount is still not large enough compared to overall market sell pressure. Arthur Hayes directly pointed out the structural problem: many tokens hit their "highest price" at the TGE listing—when hype is highest and sell pressure lowest, then every day brings more unlocks, more VC distributions, and more team vesting.
Common failure reason: Many see "the protocol is buying back" and assume the price should rise, ignoring that the absolute size of the buyback is not on the same scale as the total unlocks and sell-offs. A 2025 study introduced the "Net Flow Efficiency Ratio" (NFER): only when the annualized buyback amount exceeds the annualized unlock and emission amount (NFER > 1.0) does the buyback positively impact price; otherwise, buyback funds are simply absorbed by structural sell pressure.
Step 2: Check Revenue Quality and Stability—Buyback Money Is Not a Fixed Salary
What to do: Examine whether the source of buyback funds is sustainable, or if it will dry up when the market needs it most.
How to do it: Contrast two scenarios:
Scenario A (stable revenue): Protocol revenue comes from diversified, sustainable sources, not reliant on a single chain or activity. Such buybacks are more predictable.
Scenario B (concentrated revenue): Revenue is heavily dependent on a single source. When market sentiment cools, revenue falls → buybacks slow → buying support weakens → price under pressure, forming negative feedback.
Hyperliquid's July decline fell into Scenario B—declining trading volume led to lower fee revenue, buyback pace slowed, and buying support weakened.
Step 3: Determine the True Intent of the Buyback—'Value Return' or 'Market Operation'
What to do: Distinguish between the two motivations behind buybacks.
How to do it: Look at the following points:
Is the buyback mechanism rule-driven: Frequent, predictable, rule-based buybacks build more confidence than arbitrary one-off buybacks.
Is the buyback synchronized with inflation: If the protocol is buying back while still issuing a large number of new tokens, the buyback may simply be "offsetting" new supply rather than truly reducing circulation. In 2025, Jupiter spent $70 million on buybacks, but facing $1.2 billion in annualized unlocks, its NFER was only 0.06—essentially wasted money.
Verification after the operation: When you see a protocol buying back but the token falling, check its "Net Flow Efficiency Ratio" (NFER)—buyback amount divided by (annualized unlocks + emissions). If NFER < 1, the buyback is being overwhelmed by sell pressure. Also, pay attention to the distribution of the protocol's revenue sources—if it's highly concentrated on a single chain or activity, the "reliability" of the buyback should be discounted.
