A new report from GSR says most decentralized autonomous organizations, or DAOs, still carry a major structural weakness in treasury management: roughly 70% of treasury assets are held in their own native tokens. According to the report, that concentration can create a procyclical negative feedback loop. When a project’s token falls, treasury value declines at the same time that protocol revenue and market activity come under pressure, increasing financial strain.
GSR also said many teams only look for hedges after token prices have already dropped. By that stage, implied volatility in the market is often higher, making downside protection meaningfully more expensive. To address that problem, the firm recommends separating operating reserves from long-term token holdings and considering collar strategies to build downside protection.
In GSR’s view, wider use of hedging by crypto projects could lift options market trading volumes in the short term, while having limited effect on spot prices. Over the medium term, if DAO treasury structures improve, the report says that could reduce systemic selling pressure across the market.
ChainCatcher reported that a new GSR report found structural weaknesses in treasury management across much of the crypto DAO sector, with about 70% of treasury assets concentrated in projects’ native tokens.
GSR said that kind of balance-sheet structure can create a procyclical negative feedback loop. When a native token falls in price, treasury value shrinks, while protocol revenue and market activity are also affected, adding to a project’s financial pressure.
The report said project teams often seek hedges only after token prices have already declined. At that point, implied volatility in the market has often risen, making downside protection much more expensive.
GSR recommends that DAOs separate operating reserves from long-term token holdings and consider using a collar strategy to build downside protection. The aim is to reduce the effect of market drawdowns on treasury assets and extend how long projects can fund operations during a bear market.
In the short term, GSR said broader use of hedging strategies by projects could increase trading volume in the crypto options market, while having limited impact on spot prices. Over the medium term, if DAO treasury structures improve, that could reduce systemic selling pressure in the market.
This article was originally published by Bit.Fan. For more cryptocurrency news and market insights, visit www.bit.fan. Disclaimer:
The market information, project data, and third-party content displayed on this platform are for industry information sharing only and do not constitute any form of investment advice or return commitment.
Cryptocurrency trading carries high risks. Users should fully assess their risk tolerance and make independent decisions. All profits, losses, and legal responsibilities are borne by the users themselves.
