Why Crypto Is Global But Token Liquidity Is Still Local

We commonly envision crypto liquidity on a network-by-network basis. Token A might be highly liquid on Ethereum, less so on Solana, and illiquid on Sui, for example. While this heuristic broadly holds true – liquidity does vary greatly between networks and protocols – it’s not the only way in which crypto liquidity is unevenly distributed.

Replace “network” by “region” and you’ll often discover that the same is true: liquidity depth and conversion fees differ greatly depending on which part of the world you are in. Specifically, the liquidity available at the point of converting to and from your preferred fiat currency will vary according to where you reside and the level of support for your local currency.

The Illiquidity of the Last Mile

We can call this issue “the last mile problem.” Typically used to describe the challenges involved in delivering goods from a central hub to their final destination, in a crypto context this applies to token liquidity. Once you’ve converted into crypto, all subsequent token swaps can access global liquidity across the same CEXs, DEXs, and crypto swap services. But up until then, you’re at the mercy of the onramps available in your region, be it a neobank, crypto gateway, or exchange.

The last mile problem, when cashing out, or the first mile problem, when cashing in, is often overlooked when measuring crypto liquidity. Which is a shame, because it’s the most critical step of all. Users subjected to suboptimal exchange rates when making their first crypto purchase aren’t just losing money – they also risk losing interest in web3 before they’ve even gotten started.

Fixing this problem calls for educating users about its prevalence, so they can seek out onramps that will give them the most bang for their buck – and fade the services destined to short-change them. It also calls for token projects to step up and make it easier for users to enter the arena.

Localizing Token Liquidity

As Andrei Grachev, Partner at DWF Labs, explains, token liquidity is much more regional than commonly understood: “Real demand for crypto assets begins in specific geographies, and if users cannot easily convert their local currency into tokens or stablecoins, liquidity suffers. Fiat access – or lack thereof – directly influences trading activity, token velocity, and user retention. Projects that understand this invest early in fiat accessibility, recognizing that local access is the key to converting awareness into participation.”

In other words, it doesn’t matter how many ETH you seed your Uniswap liquidity pool with, or how many market makers you employ – if users are forced to navigate illiquid onramps, they’ve lost the game before they’ve even played the game.

It might seem unfair to lump this problem on token projects, who have enough to do without dealing with fiat pipelines – isn’t this the job of dedicated providers with banking licenses and highly paid lawyers who can tick all the right regulatory boxes? It is, but that doesn’t mean that web3 projects should bury their heads in the sand, leaving it to others to solve this challenge. Instead, they should be proactively endeavoring to improve access to their ecosystem for users whose assets are still in fiat.

Solving the First and Last Mile Problem

In real terms, addressing this problem means integrating the sorts of services that will allow users – wherever they may live – to access fiat-crypto conversion that supports their local currency and provides a fair exchange rate. Doing so calls for enhancing fiat onramps through targeted integrations and localized strategies that bridge regional gaps.

This entails more than simply bolting on one of the leading fiat onramps – Moonpay, say, or Transak – but for considering where in the world your users are likely to originate, and the fiat currency they’ll be looking to change. A DePIN providing data coverage in India, for example, will attract different users to a gaming project looking to gain a foothold in Asia. A remittance service in Africa will have different needs to one focused on RWAs.

In reality, the optimum solution typically calls for embedding multiple gateways that empower users to choose the optimum onramp. For instance, integrating Ramp allows projects to offer low-fee onramps in emerging markets like Brazil or Nigeria, where traditional exchanges may impose high spreads or limited currency pairs.

Solana-based projects, meanwhile, have collaborated with providers like Circle to support USDC conversions in Latin America, reducing reliance on volatile local exchanges. Another method involves incentivizing liquidity providers or using project treasuries to subsidize fees on regional onramps, effectively tightening spreads for specific fiat pairs.

Why It Pays to Go Local

It’s all well and good to talk the talk about banking the unbanked and democratizing access to onchain money markets. But to also walk the walk, projects have to give users a helping hand when starting their journey. This might call for integrating direct fiat-to-token purchase options within project wallets and dapps or forming partnerships with local banks, payment processors, and neobanks to create custom onramps.

These enhancements will directly benefit users by minimizing entry barriers and maximizing value retention. Lower fees and better exchange rates preserve capital, allowing more funds to flow into tokens rather than being eroded upfront. Better onboarding ultimately reduces friction and boosts retention – and given that poor first-mile experiences cause up to 70% user drop-off in web3 apps, the magnitude of this challenge cannot be overstated.

No token project can single-handedly “solve” the first mile problem. But they can, at the very least, ensure their users have access to the best onramp accessible within their region. If they can achieve that, they won’t just be throwing their prospective users a bone – they’ll be ensuring they have more funds with which to buy the project token and capitalize on the upside as its ecosystem grows. Crypto liquidity may be global, but astute web3 projects know that when it comes to onboarding, it pays to go local.

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