I find that there isn't a big enough reason to release a wolf instead of selling it due to the extremely low payouts. Keeping wolf is circulation is great at first glance but I fear we might get a population problem where no one will be buying any wolfs that aren't super pretty or special. Even breeding might slow down cuse making space for everything might get harder and harder.
My suggestion is to increase the pebble payouts (~25k instead of 5k for lv10) and maybe throw in some chance to get 0-4 moonstones for levels above lv9 or 8. This would also aid people that can't be always playing to make passive income by breeding wolves for “fodder” purposes. If releasing becomes a valuable way to make money, more people will buy pups to level and release, etc.
Once more levels come out in the campaign, people will find better ways to level their wolves as the level cap will probably also be raised. While levelling might be a bit slow now, increasing payout will make it worth it.
Edit: changing my suggestion of obtaining moonstones rarely to moonshards instead!