Injective's Supply Squeeze Receives Overwhelming Support – What's Next for INJ?

Injective is set to advance with its ambitious deflationary strategy. The proposal, known as the "supply squeeze," gained widespread approval, with 99.89% of votes in favor, according to a statement from the blockchain.

Key Takeaways

Injective's "supply squeeze" proposal received 99.89% approval.
The plan aims to dramatically reduce INJ's token supply, making it significantly deflationary.
The total supply reduction rate will double through this initiative.
Historical context shows that previous buyback strategies have removed over 6.8 million INJ tokens.
Market reactions remain mixed, with some skepticism regarding the effectiveness of such buybacks.

Injective originally launched with a total supply of 100 million tokens, serving as the governance token for its ecosystem. The Layer 1 chain has a variable inflation rate for staking rewards, fluctuating between 5% and 10% depending on the staking ratio, which is typically around 85%. Previously, the chain's deflationary initiatives relied on accumulating fees to fund buybacks that have successfully removed millions of tokens from circulation. Nonetheless, this latest approach aims to enhance these efforts by halving emissions and increasing buyback activities to further limit supply.

Injective’s ‘supply squeeze’ clears with 99% vote - What’s next for INJ?

The Initiative represents a new era for INJ, aimed at significantly reducing the token supply, positioning INJ as one of the most deflationary assets over time. The proposal, introduced on January 16, was designed as a permanent addition to the INJ token’s community buyback scheme. The key component of the plan, named IIP-617, will double the rate at which INJ's total supply is reduced, representing a 100% increase as part of a comprehensive upgrade to INJ's tokenomics.

Will the Deflation Plan Improve INJ's Market Position?

The impact of buyback programs can vary significantly across different blockchain projects. Some, such as Hyperliquid [HYPE], view these efforts as a means of enhancing token value, while others, such as Jupiter [JUP], argue that buybacks might waste resources if the token does not experience a price increase. It remains uncertain whether INJ's dual strategy will diminish the skepticism surrounding initiatives like Jupiter's.

In the interim, INJ's performance has mirrored the general market sentiment, rather than the positive developments from the recent updates. Following the announcement, INJ experienced a 4% increase but later saw some of those gains vanish as Bitcoin [BTC] retraced to $90K, attributed to U.S. President Donald Trump's tariffs on Europe.

Injective INJ

After falling below the $5 mark, INJ briefly hit December lows around $4.4 and might retest that support level or dip further to $4.42 if selling pressure continues. The Futures market also showed tepid demand, as evidenced by a declining Cumulative Volume Delta (CVD) since January 15, despite updates regarding the "supply squeeze."

Injective INJ

Source: Velo

Interestingly, Open Interest (OI) remained static around $25 million, despite the optimistic outlook presumed by the latest tokenomics update. Collectively, these indicators suggest that prevailing market sentiment is overshadowing the positive changes in INJ's development. The possibility for the price to align with these advancements remains to be seen.

Final Thoughts

As Injective embarks on this new deflationary journey, it will be crucial to monitor how market dynamics react to these innovations in tokenomics. The evolving landscape of cryptocurrency is unpredictable, and only time will tell if INJ can capitalize on the support garnered from the community vote.