What Does Buyback Mean in the Cryptocurrency Market?
What Does Buyback Mean in the Cryptocurrency Market?
The term "buyback" in English means buyback in Turkish. Although the concept of buyback is generally used in traditional financial markets, it has started to be used in this field as well with the popularization of the cryptocurrency sector. Buyback means that companies or project developers collect their own shares from the market. In this article, you can find a detailed answer to the question of what is a buyback.
What is Buyback?
The concept of buyback refers to companies buying back their own shares in the traditional financial system. The circulating supply of a share decreases as companies buyback their own shares. The aim is to increase the value of the share receiving the supply. Companies aim to keep the circulating supply of financial assets under control by buying back their own shares.
The concept of buyback is also used in the cryptocurrency market. Project teams developing a crypto asset can carry out buyback transactions for the cryptocurrency in the market in order to control the circulating supply of the cryptocurrency. As a result of the buyback process, the supply amount of the cryptocurrency is reduced.
Why is Buyback Done?
Project developers developing a crypto asset can use the buyback method to avoid decreasing the value of the cryptocurrency. Project developers using buyback may aim to protect the value of the cryptocurrency while also reducing the cost of their users investing in that cryptocurrency. The aim is to reduce the supply of the cryptocurrency in circulation by purchasing it by its developers. The value of the cryptocurrency, whose supply decreases, is expected to increase. Project developers who choose the buyback method aim to control the downward trend of the developed cryptocurrency and give confidence to investing users when the cryptocurrency market is volatile.
Cryptocurrency burning refers to the process of transferring the private key of a cryptocurrency or token to an inaccessible wallet. After the cryptocurrency burning process, the circulating supply of cryptocurrency decreases at a certain rate. A decrease in circulating supply can create a high demand rate. This may lead to an increase in the value of the burned cryptocurrency. For project developers, cryptocurrency burning is used to maintain control over the number of existing cryptocurrencies in circulation.
The concepts of buyback and coin burn are basically carried out towards the same goal. In both methods, the aim is to reduce the circulating supply of a cryptocurrency and, as a result, increase the value of the cryptocurrency.
The difference between buyback and coin burn methods is that as a result of the buyback process, the cryptocurrencies taken back by the project managers and developers are stored in the teams' cryptocurrency wallets. These stored cryptocurrencies can be reused at later times. In the coin burn process, the cryptocurrencies whose supply is intended to be reduced are transferred to the inaccessible wallet. After the transfer process, these cryptocurrencies cannot be accessed again and are deleted from circulation.
