AAVE and JUP Buybacks Aren’t Keeping Up With New Supply
Grayscale's research shows Aave (AAVE) and Jupiter (JUP) have positive earnings yields, but negative tokenholder yields when accounting for buybacks, rewards, and supply growth. AAVE's buybacks fund its ecosystem reserve, while JUP's buybacks and burns haven't offset new supply. Both protocols face challenges in balancing revenue, operating costs, and token economics.
How this was made
The 30-second read
Why it matters
Both tokens show negative holder yields, indicating that new issuance outpaces buybacks and rewards, which could pressure prices.
Market read
The negative tokenholder yields suggest potential downside for AAVE and JUP, useful for crypto traders monitoring supply‑dilution dynamics.
What to watch
Potential future protocol fee growth or cost reductions could increase earnings available for buybacks.
Background
The article analyzes Grayscale's valuation framework for crypto tokens, focusing on the gap between earnings yields and tokenholder yields for Aave (AAVE) and Jupiter (JUP).
Ticker impact
Grayscale notes that Aave's buybacks have not kept pace with new token issuance, leading to a negative tokenholder yield.
likely pressure as supply growth exceeds buybacks and rewards
Buyback volume (205,000 AAVE) is small relative to circulating supply growth, reducing net earnings to holders.
Grayscale reports Jupiter's buybacks and burns are lagging behind new JUP issuance, resulting in a negative tokenholder yield.
likely pressure as new minting dilutes holders faster than buybacks and burns
Half of on‑chain revenue funds a reserve that buys JUP, but issuance and unlocks outpace these purchases.
Market effects
Highlights broader challenges for DeFi token economics where supply growth can erode holder returns.
Primarily affects crypto markets globally; no specific regional bias.
Relevant to investors tracking crypto token supply dynamics and yield metrics.
Counterpoint
Buybacks may still provide floor support if protocol revenue improves, offsetting dilution over time.
Key entities
- research firmGrayscale
Provides the earnings and tokenholder yield calculations for crypto protocols.
- protocolAave
Decentralized lending platform issuing the AAVE token.
- protocolJupiter
DeFi platform issuing the JUP token.
