DydX Approves 75% Buyback Allocation to Reduce Supply by 5% annually and Restore Investor Confidence.

• Dydx votes to increase token buybacks from 25% to 75% of protocol fees

• Dydx is down 75% and the token buybacks are projected to boost it 13% against ETH,

• Token buybacks aim to reduce the circulating supply by 5% annually.

dYdX Increases Buyback Allocation to 75% of Protocol Fees

The dYdX community has officially voted to increase token buybacks from 25% to 75% of protocol fees, marking a significant shift in the decentralized exchange’s capital allocation strategy.

Starting today, three-quarters of all protocol revenue will be used to repurchase DYDX tokens directly from the open market. This move aimed to reduce token inflation, improve liquidity, and restore investor confidence after a challenging year for the token’s price.

The decision follows months of community discussions around how to strengthen the token’s fundamentals following a 75% price decline over the past year.

By reallocating funds from staking and the underperforming MegaVault incentive program toward buybacks, dYdX aims to sustain buying pressure and create long-term value for tokenholders.

Buybacks as a Strategic Tool for Recovery

At current market prices between $0.30 and $0.40, dYdX’s existing 25% buyback allocation accounts for 1.25%–1.67% of its diluted supply annually. Under the new 75% structure, the exchange could potentially buy back 3.75%–5% of the total diluted supply each year, assuming annual protocol revenue of around $20 million.

This scale of buyback places dYdX among the most aggressive DeFi protocols in terms of capital returns to holders. Buybacks are a popular mechanism for token value enhancement because they effectively reduce circulating supply, mitigate inflation, and create consistent market demand.

Analysts note that such programs tend to outperform the broader crypto market in the short term. Based on historical data from other DeFi buyback announcements, tokens saw an average 13.9% outperformance versus ETH within two days following similar news.

Investor Sentiment Strengthens Despite Lower Staking Yields

Interestingly, while the buyback allocation will come at the expense of staking rewards, staker participation has remained strong. After the protocol cut staking yield from 9.38% to 4.17% and reduced staker revenue allocation from 100% to 40%, staking participation still rose from 31.49% to 34.01% of total supply, with only 17.9% of users choosing to unstake.

This resilience suggests that investors are prioritizing long-term value creation and token stability over short-term yield. The move to shift more revenue toward buybacks rather than staking or Treasury allocations appears to align closely with the broader community’s preference for strengthening DYDX’s market performance and utility.

Addressing MegaVault Decline and Rebalancing Revenue Allocation

The MegaVault, which previously received a large share of protocol revenue, has seen a 72% decline in Total Value Locked (TVL), signaling waning user engagement. The reallocation toward buybacks not only responds to this drop but also reflects a strategic pivot to maximize the protocol’s capital efficiency.

By directing a majority of revenue to buybacks, the team expects to counteract downward pressure on DYDX’s price while maintaining sufficient funding for operations and ecosystem development. This model is increasingly being adopted across DeFi as projects seek to balance growth incentives with market-based token value support.

Buybacks to Reinforce Confidence and Reduce Supply

As DYDX trades around $0.34, with depressed market sentiment and reduced trading volume, the buyback expansion represents a decisive confidence-building measure. Analysts expect the move to have various impacts on DyDx. First, it will strengthen DYDX’s tokenomics by lowering the circulating supply.

Secondly, it will improve investor sentiment amid broader weakness in the DeFi market. Finally, position dYdX among the top DeFi protocols by buyback scale, potentially repurchasing up to 5% of total supply annually. The protocol’s governance-led decision reflects growing maturity within decentralized ecosystems, where communities are directly shaping capital management strategies to sustain long-term growth.

Conclusion

dYdX’s 75% buyback policy marks a pivotal moment in the platform’s evolution, emphasizing supply reduction, price stabilization, and investor alignment. By prioritizing token repurchases over staking and MegaVault incentives, the community is signaling renewed confidence in DYDX’s intrinsic value and future potential.

If historical trends hold, this expanded buyback program could not only drive short-term price outperformance but also establish dYdX as a benchmark for responsible, community-driven DeFi governance.