In a significant departure from its prior strategy, Pump.fun, a Solana-based token issuance launchpad, has announced that it will no longer dedicate 100% of its revenue to buying and burning its native token, PUMP. This change marks the end of a nine-month policy that aimed to boost the token's price by consistently reducing its supply. Instead, the company will now allocate half of its net revenue from its core products - the Pump.fun bonding curve, PumpSwap, and Terminal - to an irreversible smart contract that will automatically purchase and burn PUMP tokens on the open market over the next year. The remaining half will be retained by the company to fund product development, hiring, marketing efforts, and potential acquisitions.
This shift in strategy follows a review of the previous buyback policy, which, despite burning approximately 36% of the token's circulating supply over the past nine months, did not yield the desired results in terms of token price appreciation. According to Pump.fun co-founder Alon Cohen, the decision to split revenue is essential for the company's long-term sustainability and growth, enabling it to invest in its products and services while continuing to reduce the token's supply. The move has been necessitated by the token's price performance, which has largely traded sideways below its launch valuation despite the significant buybacks.
The new strategy is expected to have a mixed impact, with the bear case citing the cyclical nature of memecoin launchpad volume and the potential for smaller burns due to declining revenue. On the other hand, the bull case argues that the ongoing burns will continue to reduce the token's supply, potentially leading to a bullish setup if demand remains steady.
The announcement has already had a positive impact on the token's price, which rose by 6.9% in the 24 hours following the news.