The Solana-based token issuance platform, Pump.fun, has been operating under a straightforward model, where every dollar of revenue was dedicated to buying and burning its native token, PUMP. Theoretically, this continuous reduction in supply was intended to support the token's price and align its value with the platform's success. However, after reviewing the previous policy, the company has decided to adopt a new approach, splitting its revenue evenly between token buybacks and operational costs. This change marks a significant shift from the previous 100% buyback policy.
According to the company, half of its future net revenue from its core products will be allocated to an irreversible smart contract that automatically buys and burns PUMP tokens on the open market. The other half will be retained by the company to invest in product development, hiring, marketing, and potential acquisitions. Over the past nine months, Pump.fun has burned approximately 36% of PUMP's circulating supply, which is one of the largest single-event supply reductions in crypto history.
Co-founder Alon Cohen explained that this change is necessary to ensure the company's long-term survival and growth. The price chart of PUMP has been trading sideways below its launch valuation, despite the company's efforts to buy back and burn tokens. The new policy is expected to have a significant impact on the token's price, with some arguing that the reduced supply could lead to a bullish setup. However, others point out that the memecoin launchpad volume is cyclical and mean-reverting, which could affect the company's revenue and token burn strategy.