GSR Flags Treasury Risk as Most DAOs Hold About 70% of Assets in Native Tokens

Crypto treasury management suffers from structural weaknesses that can amplify financial pressure during market downturns, according to a GSR report.

The report said most decentralized autonomous organizations, or DAOs, keep about 70% of their treasury assets in their own native tokens. That concentration can cause treasury values, protocol revenue, and market activity to decline simultaneously, creating a procyclical negative feedback loop.

Projects also frequently seek hedging after their token prices have already declined, GSR said. By that stage, implied volatility has typically increased, making downside protection more expensive.

GSR recommended separating operational reserves from long-term holdings and using collar structures to secure downside protection at zero cost. Such measures can extend a project’s runway during bear markets, according to the report.

Source: GSR