NEAR Drops 7% Despite Community Approval of Token Supply Reduction
NEAR token fell 7% despite community approval of proposal HSP-029 to reduce annual issuance from 2.5% to 1.6%. The move aims to curb dilution, though staking yields may drop.
The NEAR cryptocurrency fell by about 7% on Tuesday, despite the project community approving a proposal a day earlier aimed at reducing the rate of new token creation. According to CoinMarketCap data cited by crypto media, the coin traded around $3.82, with its cumulative weekly decline reaching approximately 13%.
The decision was designed to reduce the growth rate of token supply, but market reaction demonstrates that economic changes intended to support asset value do not guarantee an immediate price increase. The proposal, numbered HSP-029, was approved in the project governance body, NEAR House of Stake, with about 99.9% support from the participating voting power.
Mechanics of the Proposed Reduction
According to published data, roughly 3.28 million veNEAR tokens—locked tokens used for voting—backed the initiative. The proposal seeks to gradually lower the maximum annual issuance cap from 2.5% to 1.6% over a 24-month period. This involves a gradual reduction in the rate of new token creation rather than removing already circulating tokens from the market.
Estimates presented in the proposal indicate that its implementation will prevent the entry of approximately 11.8 million NEAR tokens into circulation during the first two years, valued at around $45 million at the time of reporting. Over a six-year horizon, the reduction could reach about 66.1 million tokens.
The goal is to mitigate the dilution of existing holders' relative shares. When new tokens are minted, the proportion held by the public shrinks relative to the total supply unless demand grows accordingly.
Impact on Staking Rewards
However, the move has a downside. Stakeholders who lock their tokens to help secure the network and earn rewards may receive less. According to published forecasts, the gross annual yield from staking and depositing coins for network security could drop from about 5.2% to around 3.3% by the end of the transition period. Such a change could make holding less attractive for some investors, at least in the short term.
It is important to emphasize that the proposal is not yet a finalized change. According to industry reports, the project's Security Council has a 14-day window to exercise a veto. If no veto is cast, a 90-day waiting period will begin, followed by a technical update that network validators must adopt. Only after these stages are completed is the reduction expected to take effect.
