GSR report finds DAOs concentrated in native tokens (70% of treasuries), creating procyclical negative feedback loops and recommending hedging strategies like collar structures.
DeFi & Yields ·
A GSR report identifies a structural vulnerability in decentralized autonomous organization treasury management: approximately 70% of DAO treasury assets are held in native tokens, the projects' own cryptocurrencies. This concentration creates what the report characterizes as a procyclical negative feedback loop, where treasury value, protocol revenue, and market activity all decline simultaneously when token prices fall.
The report notes a timing problem in risk mitigation. DAOs typically pursue hedging strategies only after token prices have already declined, at which point implied volatility has risen and protective instruments become expensive to acquire. This reactive approach leaves treasuries exposed during the initial phases of downturns when protection would be most valuable.
The report recommends two structural changes: separating operational reserves from long-term token holdings, and employing collar structures—a hedging mechanism designed to provide downside protection at zero net cost. These strategies are framed as means to extend a project's operational runway during bear markets. What remains unclear is the extent to which DAOs have adopted or plan to adopt these recommendations, or whether alternative treasury composition targets have emerged elsewhere in the sector.