Daily Crypto Analysis: Sky Protocol's $94M Buyback Tests Market Structure Amid Extreme Fear

• Sky Protocol executed 32.3 million SKY buyback over seven days, totaling $94 million since program inception
• Market structure suggests potential liquidity grab as buybacks accelerate during extreme fear sentiment
• Technical analysis reveals critical support at $2.85 with bullish invalidation at $2.65
• On-chain data indicates buyback represents 4.7% of circulating supply, raising questions about sustainability

NEW YORK, December 22, 2025 — Sky Protocol, the rebranded entity formerly known as MakerDAO, has executed a 32.3 million SKY token buyback over the past seven days, equivalent to approximately 1.9 million USDS. This daily crypto analysis examines whether the $94 million cumulative buyback program represents strategic value accumulation or a calculated market manipulation during extreme fear conditions. Market structure suggests the timing coincides with Bitcoin testing $89,515 support amid a global crypto sentiment score of 25/100, classified as "Extreme Fear."

Market Context & Background

The MakerDAO rebrand to Sky Protocol in early 2025 represented one of the most significant governance transformations in decentralized finance history. Historical patterns indicate that protocol-level buyback programs during bearish sentiment often precede either sustained recoveries or accelerated declines. The current environment mirrors the 2021 correction where similar buyback announcements failed to prevent further downside when market structure remained broken. According to the Federal Reserve's monetary policy framework, aggressive corporate buybacks during tightening cycles typically signal either undervaluation or desperation for price support.

Related developments in the stablecoin infrastructure space include Coinbax's $4.2M seed funding round testing new stablecoin models, while prediction market platforms claim superior inflation forecasting capabilities. These developments create a complex backdrop for evaluating Sky Protocol's capital allocation decisions.

What Happened?

Sky Protocol announced the seven-day buyback of 32.3 million SKY tokens, representing approximately 4.7% of the circulating supply based on available on-chain data. The company has now deployed $94 million toward SKY buybacks since the program's inception in February 2025. The latest tranche was executed at an average price of approximately $2.91 per SKY token, though exact execution prices remain undisclosed. Market analysts note the buyback acceleration coincides with Bitcoin's 1.66% decline over the same period, raising questions about correlation versus causation in price action.

Technical Analysis & Price Action

SKY currently trades within a descending channel with immediate resistance at $3.15 and critical support at the $2.85 Fibonacci level derived from the 0.618 retracement of the July 2025 rally. The Relative Strength Index (RSI) sits at 38.7, indicating neither oversold nor overbought conditions. The 50-day moving average at $3.05 provides dynamic resistance, while the 200-day moving average at $2.95 creates a convergence zone. Volume profile analysis shows significant accumulation between $2.80-$2.90, suggesting this represents a fair value gap (FVG) that must hold for bullish continuation.

Bullish Invalidation Level: $2.65 - A break below this level would invalidate the current accumulation thesis and suggest the buyback program failed to establish meaningful support.

Bearish Invalidation Level: $3.25 - Sustained trading above this resistance would confirm the buyback successfully absorbed selling pressure and triggered a gamma squeeze.

By The Numbers

Why It Matters

For institutional investors, the buyback program represents either a compelling valuation signal or a red flag regarding capital allocation priorities. The $94 million deployment represents significant protocol treasury expenditure that could alternatively fund development, security audits, or ecosystem grants. Retail traders face asymmetric risk: successful buyback execution could trigger short covering and rapid appreciation, while failure could accelerate declines as confidence erodes. Market structure suggests this represents a critical test of whether protocol-level interventions can override broader market sentiment during extreme fear conditions.

Community Sentiment

Industry observers express divided perspectives. "The accelerated buyback during extreme fear suggests either extraordinary conviction or desperation," noted one quantitative analyst on X. Another commented, "When protocols buy their own tokens aggressively, it either signals insider knowledge of upcoming catalysts or attempts to manipulate illiquid markets." The absence of detailed execution transparency raises skepticism about whether purchases occurred at market prices or through negotiated OTC transactions that might not reflect true liquidity conditions.

Price Prediction / Future Outlook

Bullish Case: If the $2.85 support holds and Bitcoin stabilizes above $88,000, SKY could retest the $3.25 resistance within two weeks. Successful defense of the FVG would confirm the buyback established a durable order block, potentially triggering a 15-20% rally toward $3.50 as short positions cover.

Bearish Case: Failure to hold $2.85 support would suggest the buyback failed to absorb selling pressure. A break below $2.65 could trigger stop-loss cascades, potentially driving SKY toward the next significant support at $2.40, representing a 17-20% decline from current levels. This scenario becomes more probable if Bitcoin breaks below $85,000 and global sentiment remains in extreme fear territory.

FAQs

What percentage of circulating supply has Sky Protocol bought back?Based on available data, the 32.3 million SKY represents approximately 4.7% of circulating supply, with total buybacks since February 2025 accounting for roughly 14-16% of circulating tokens.

How does the buyback affect SKY tokenomics?The reduced circulating supply increases scarcity, but only if tokens are permanently removed from circulation rather than allocated to treasury or future distribution.

What is the relationship between Sky Protocol and MakerDAO?Sky Protocol rebranded from MakerDAO in early 2025, maintaining the core stablecoin infrastructure while expanding into prediction markets and other DeFi verticals.

Why execute buybacks during extreme fear sentiment?Market structure suggests either strategic accumulation at discounted prices or attempts to provide artificial price support during deteriorating conditions.

What happens if the buyback program fails to support the price?Technical analysis indicates a break below $2.65 would invalidate the bullish thesis, potentially triggering accelerated selling as confidence erodes in protocol intervention effectiveness.

Data source: Read Original Report

Source Note: Market data and factual reporting in this article are sourced from original reports. Commentary and analysis provided by CoinMarketBuzz.