The Impact of a Proposed 30% Supply Reduction for $JUP
Introduction: Meow, the founder of Jupiter, has recently proposed a significant change to the $JUP tokenomics: a 30% reduction in the total supply. This proposal suggests that the team will receive 30% less of their vested $JUP, and the annual Jupuary airdrop will be reduced by 30%. Overall, this will decrease the total supply by 30%. The fate of this proposal rests in the hands of the Jupiter DAO, which will vote to determine its implementation. This blog post explores how the market may react to either outcome and discusses the potential pros and cons.
Potential Market Reactions:
1. Approval of the 30% Supply Reduction:
Positive Reactions:
Increased Scarcity: A reduction in supply often leads to increased token scarcity, which can drive up demand and potentially lead to a price increase.
Investor Confidence: Demonstrating a commitment to long-term value by reducing supply could boost investor confidence and attract new investors.
Enhanced Stability: By limiting the amount of $JUP entering the market, there might be less volatility, leading to a more stable market environment.
Limited Dumping Capacity: Those who intend to dump the next round of airdrops will have a limited capacity to do so, potentially reducing downward pressure on the token’s price.
Negative Reactions:
Short-Term Sell-Offs: Current holders might sell off their tokens anticipating a market correction or fearing reduced future rewards.
Reduced Incentives: Lower airdrop rewards might discourage some users from engaging with the platform, potentially slowing community growth.
Uncertainty: Any major change can introduce uncertainty, which might make some investors hesitant to maintain or increase their holdings.
2. Rejection of the 30% Supply Reduction:
Positive Reactions:
Maintained Incentives: Keeping the airdrop and team rewards as initially planned can continue to incentivize participation and engagement.
Predictability: Maintaining the current supply structure provides a predictable environment, which can be reassuring for investors.
Growth Opportunities: Higher airdrop rewards might attract more users and stimulate platform activity, aiding in ecosystem growth.
Negative Reactions:
Inflation Concerns: Without reducing the supply, there might be concerns about inflation and the long-term value of $JUP.
Missed Scarcity Benefits: The potential benefits of increased scarcity, such as higher token value, will not be realized.
Market Dilution: Continued issuance of $JUP might lead to market dilution, where the value of each token could decrease over time.
Decreasing Value: With an increase in circulating supply each year, the value of $JUP may decrease with each airdrop. Those not aligned with the project may dump their airdrop, causing additional downward pressure on the token’s price.
Pros and Cons of the Supply Reduction Proposal:
Pros:
Increased Token Value: Reduced supply can lead to increased scarcity and potentially higher token prices.
Enhanced Investor Confidence: Shows a commitment to the long-term value of the token, which can attract and retain investors.
Stability: Potentially less market volatility with fewer tokens entering circulation.
Limited Dumping Capacity: Reducing the supply limits the capacity for those who intend to dump their airdrops, potentially mitigating downward pressure on the token’s price.
Cons:
Lower Rewards: Reduced airdrop and team rewards might discourage user participation and engagement.
Short-Term Volatility: The announcement and implementation of the reduction might cause short-term market volatility.
Uncertainty: Major changes can introduce uncertainty, which might make investors cautious.
Now, my ask for you guys is what do you think? How will you vote? Please discuss bellow!
Nice that you gave such an elevated poll basically. On could say you gave all the extra info to make an easier decision, but fun fact, after reading it it gives me more for my gears to grind as you did an excellent job of giving fair comparisons on pro and contra!
All discussions and poll should have such a minute and detailed overview!
I just Brain stormed everything that came to mind, some propositions may be a little out of scope, but that’s the idea behind discussion isn’t it?
My vote has swayed a lot for and against . In fact Im still split. It would be nice to have more JUP in my hands to vote for ASR proposals ect, but on the other hand, from a financial and price perspective having JUP push towards uniswaps Market Cap and potentially capsizing them excites me!
Jup is destined to be the biggest crypto platform ever! I feel whatever way it goes, it will all be okay in the end
If circulating supply and FDMC were taken seriously at all pretty much no memecoin would exist.
However they do, which is testament to burns being pure theatre.
Burning tokens/reducing supply will just give you less firepower to incentivise behaviour you want.
There’s nowhere near the people we need on Solana to sustain it long term yet so there’s a heap of buy pressure coming. The best thing Jupiter can do is what they are doing now: Lot’s and lot’s of onboarding and product development.
Burning 30% of supply from treasury might benefit current holders in the long-term. Short-term I do not know how much impact this will have. Burning supply is a narrative that people believe in and causes differences in their behavior, or not.
Narratives aside, getting people to interact with the DAO and “learning by doing” will be what gives JUP value. Along with LFG and ASR tweaks that I’ve posted in other threads, human attention is what we need. Perhaps a change in tokenomics is a catalyst for that, but who knows.
The 30% reduction will be 50% (1.5B) from the team allocation and 50% (1.5B) from the community allocation. Therefore, the total amount available for airdrops will be reduced.
I think from this, its fair to say, there are those who are truly here to back this project to the last and I also believed that airdrop allocation will subsequently decrease over time if 30% reduction was to be achieved but at the same time, there will still be people using jupiter . I think jupiter is going to stick around for a while now.
A decrease in supply does not always increase the price.
The value and use of that token (jup) will increase the demand and thus increase the price, which has a much stronger effect than the decrease in supply.
You have to do something to increase the demand for the token, you have to make your token functional, not just stake to vote for a few projects (bad or good).
By doing this (reducing the supply) your token(jup) will not become valuable.
See the casino token policy?
They pay daily and monthly rewards to their token stakers , not with their own tokens, but with USDT, which if they pay with their own tokens, it will increase the supply. As an exchange, you earn many times more than a casino
If you give usdt to Jupiter stakers, you can be sure that they will buy more tokens from you with your AirDrop money, which will cause an explosion in the value of your token.
For example, pay 50% or 20% or 10% of your monthly income to stakers.
Anyone who wasn’t sure what this “30% supply reduction” is all about can just bookmark this, start reading thru it over & over again and it can help you understand both sides of the issue from a unbiased write-up done here brilliantly by @lochie2001 to reach voting decision before the proposal for this 30% reduction in supply gets put to vote officially. Brilliant job @lochie2001​:raised_hands:t6:
A reduced supply does not guarantee price appreciation. Better token utility will create token demand and get the overall long term stability and price appreciation. Focus should be on that. Reducing supply artificially will limit your ability to incentivise behaviour you want.
