More Than 70% of Digital-Asset Project Treasuries Are in Tokens, GSR Says

Digital-asset projects hold more than 70% of their treasury assets in self-issued tokens, highlighting the need for advance risk management ahead of a market downturn, GSR said.

In a report released Aug. 8, the market maker said more than 70% of decentralized autonomous organization, or DAO, treasury assets consist of native tokens. If token prices fall, projects could be forced to sell more tokens to cover the same level of operating expenses.

Selling additional tokens in a bear market would add fresh downward pressure on prices and further increase the volume that needs to be sold. GSR said projects should test whether their current treasuries can still support their roadmaps even if the market declines further over the next 12 months.

The firm also said hedging should be put in place before prices plunge. Demand for hedging is typically low in bull markets, but it repeatedly surges when markets turn lower and projects move to protect against downside risk. Hedging should be treated as an ongoing treasury-management policy rather than a one-off trade driven by a market view.

GSR recommended the collar strategy as a hedging tool.

A collar involves selling a call option with a strike price above the current market price and using the premium to buy a put option with a strike price below the current price.

Projects that have successfully navigated multiple market cycles tend to separate and manage treasury assets by purpose, GSR said. Holding an entire treasury in native tokens can erase years of operating runway in a sharp price decline.