Author: Delphi Digital; Source: X, @Delphi_Digital; Compiler: Shaw, Golden Finance

In this cycle, the token income market is restricted by several core issues: Internal personnel’s token unlocking is strictly carried out according to the schedule, completely ignoring the actual performance of the project; the income generated by the agreement is rarely distributed to currency holders; the airdrop originally used to expand the coverage of token distribution has instead become a shipping liquidity for internal cash out.

Starting from January 2025, when new currencies are listed on major centralized exchanges, the result of mindless buying is that the principal of US$1,000 will only be left with about US$500. The median price of newly listed coins has dropped by 82%, and only 12% of the coins’ current prices are higher than their listing opening prices. At that time, the platform only focused on quantity and completely ignored the quality of projects.

Token mechanism design flaws

Timetable token dilution causes quantifiable revenue losses in the tracking sample. This tracking counted 33 tokens and more than 400 unlocking events. Among them, 28 tokens underperformed Bitcoin in the three-week period before and after each unlock. On average, each unlock will reduce the excess return of the token relative to Bitcoin by about 7%. Unlocks are mostly released within 30 days, leaving the market with no time to digest the selling pressure.

The second crux lies in the lack of value capture mechanism. Over the years, the project founding team has been unwilling to distribute fee income to token holders due to securities compliance risk considerations. This has created a large number of governance tokens that only have governance functions and have no right to share the protocol revenue.

Fees income conversion mechanism

Nowadays, allleading decentralized financial protocols with the ability to generate stable income have either built a value capture system at the beginning of their launch, or have added this mechanism through community voting:

• Hyperliquid: Almost all transaction fees are used for token repurchases;

• Uniswap: 100 million UNI tokens were destroyed, and the scale of destruction was comparable to the fee income that should have been accumulated and distributed since 2018;

• Jupiter: First reduce the maximum total supply of tokens, and then invest 50% of the handling fee into a three-year lock-up repurchase plan;

• Aave: Its Decentralized Autonomous Organization (DAO) voted to pass the plan and use the protocol revenue to use US$1 million every week to carry out token repurchases.

This arbitrage strategy was particularly effective between January 2025 and May 2026. A basket of tokens selected from the top ten protocols, proportioned by revenue weight and adjusted weekly, rose by 30%; during the same period, Bitcoin fell by 17%, Ethereum fell by 35%, and Solana fell by 58%.

The fee income conversion mechanism alone cannot solve the problem of token supply selling pressure. Aave invested US$42 million in repurchase, and the scale of unlocked selling during the same period reached US$47 million, which means that the repurchase basically only offset the additional issuance of new tokens and did not form a large-scale net buying tray. Jupiter is one of the projects with the strongest repurchase intensity in the sample, but the volume of historical unlocked selling pressure is about four times the repurchase funds. Hyperliquid (HYPE) has increased by more than 500% in the statistical range. The core reason is that the repurchase order supported by handling fees is enough to undertake the limited internal chip selling. Only when the repurchase program can fully absorb the supply of market selling orders can it truly drive the currency price upward.

Some project teams are working to solve the problem of token issuance and supply from the source. MegaETH has set up a constraint mechanism: only after the project reaches the product's key performance indicators can more than half of the total supply of tokens be unlocked; if the agreement fails to meet the standards, the internally held tokens will continue to be locked. Hyperliquid circumvented this problem from the source and did not reserve a share of venture capital when the project was launched. Uniswap and Jupiter subsequently reduced the supply of existing old tokens through governance voting.

Long-term buyer funds

The currency buyer structure has also undergone iterative changes. The IBIT positions held by institutions as a whole increased by 62% year-on-year; the positions held by financial advisory channels increased by 204%, and the positions of sovereign funds and endowment funds increased by 228%. Hedge funds conducting basis trades have reduced their holdings and left IBIT. Morgan Stanley, BlackRock, and Mubadala Investment Company established new or increased positions. Such holders generally have longer-term holding cycles.

The next batch of tokens with long-term holding value will have two major characteristics at the same time: first, the protocol revenue will be distributed back to the token holders, and second, the rhythm of token release will be deeply tied to the project operating performance. Looking at the overall trend, this is the most solid fundamental pattern in the history of this asset class.