The landscape of stablecoin liquidity has undergone a seismic shift in recent years, with the average liquidity per token plummeting from $1.8 million in 2021 to a mere $5,500 in March 2025. This staggering 99.7% drop has forced crypto protocols to reevaluate their strategies and demonstrate compelling reasons for investors to hold their tokens.
A recent report by research firm Decentralised delves into this phenomenon, attributing the decline in liquidity to the proliferation of new tokens without a corresponding increase in demand or user retention. This zero-sum dynamic in crypto capital allocation has resulted in lower liquidity, weaker communities, and diminished engagement across the board.
Gone are the days when launching a community through Discord servers and airdrop campaigns was enough to sustain long-term interest. Projects now face the imperative of proving product-market fit and generating sustainable revenue to justify their token valuations, establish governance legitimacy, and maintain user participation.
The report categorizes crypto projects into three distinct groups based on their revenue generation and governance structures. Climbers, with annual revenue ranging from $10 million to $50 million, are transitioning from emissions-based growth to a focus on user retention and ecosystem governance. Titans like Aave, Uniswap, and Hyperliquid have established revenue streams, decentralized governance models, and strong network effects, allowing them to prioritize category dominance over diversification. Seasonals, on the other hand, are short-lived phenomena driven by hype cycles and struggle to maintain user interest or revenue consistency in the long run.
In line with traditional equity markets, the report highlights the importance of revenue distribution models in the crypto space. Buybacks, in particular, are seen as a flexible tool for projects with volatile revenue or seasonal demand patterns. However, the execution of buyback programs must be carefully managed to avoid benefiting short-term traders at the expense of long-term holders.
Investor relations (IR) also emerge as a crucial yet underdeveloped function in the crypto world. Transparency in financial reporting, real-time dashboards, and clear token distribution disclosures are essential to building trust with token holders and institutional participants. Leading projects are already implementing these standards, such as Aave’s “Buy and Distribute” program and Hyperliquid’s revenue allocation strategy.
As the pressure mounts on crypto projects to prove their viability through cash flow and transparency, responsible capital allocation will be key to weathering the storm of declining liquidity per asset. By prioritizing timing, governance, and communication, projects can navigate the evolving landscape of crypto capital allocation and emerge stronger in the long run.