GSR report reveals DAOs hold 70% of treasury in native tokens

by@WuBlockchain

Summary

A report from GSR highlights significant structural flaws in crypto treasury management, revealing that most decentralized autonomous organizations (DAOs) hold approximately 70% of their treasury assets in their own native tokens. This concentration results in a procyclical negative feedback loop where declines in token value, protocol revenue, and market activity occur simultaneously. The report advises DAOs to separate short-term operational reserves from long-term holdings and suggests using zero-cost collar structures for downside protection, which could extend a project's runway during bear markets. Additionally, it notes that many projects wait until after token prices fall to hedge, leading to higher costs due to increased implied volatility.

Analysis

GSR: GSR is a cryptocurrency trading and market-making firm that provides liquidity, execution, and risk management services for digital assets. The firm authored the report analyzing DAO treasury practices and identifying structural vulnerabilities in asset allocation. GSR proposes separating operational reserves from long-term holdings and using collar structures for downside protection. Risk Mitigation: Separating short-term operational reserves from longer-term holdings and employing zero-cost collar structures can provide downside protection while preserving upside exposure. Hedging Practices: Projects frequently delay protective measures until after token prices decline, when implied volatility rises and hedging costs increase. Treasury Management: Many decentralized autonomous organizations concentrate the majority of their holdings in native tokens, tying treasury value directly to protocol revenue and market activity.

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