GSR: Crypto Project Treasuries Overly Concentrated in Native Tokens, Pro-cyclical Structure Exacerbates Bear Market Vulnerabilities

August 8th. Cryptocurrency market maker GSR released a Cryptocurrency Treasury Management analysis, pointing out that the current industry treasury structure has a fundamental vulnerability - nearly 70% of the assets in DAO treasuries are held in the form of native tokens, with a very low proportion allocated to stable assets or diversified reserves. This structure exposes projects to a triple blow during bear markets: token price declines, protocol activity slowdown, and fee revenue contraction. As operating costs are denominated in dollars, projects are forced to sell more tokens at a lower price to meet fixed expenses, further depressing the token price and accelerating treasury depletion. Project teams almost always seek protection at the wrong time - no one is willing to pay premiums for options during a bull market, and demand for hedging surges after a market crash, but by then implied volatility has soared, making protection costs prohibitively high. "It's like trying to buy insurance when the storm is already overhead."

GSR points out that protecting a position does not require selling tokens. The collar option is the most commonly executed structure: the project sells a call option above the current price and uses the premium received to buy a put option below, completing the offsetting trade at zero cost. This structure transforms a highly volatile asset into a range where the finance team can plan the annual budget, while maintaining the holding and operational reserves.

GSR then emphasizes that the collar can only protect the range of the opening day's price. Projects that can successfully navigate multiple cycles typically manage their treasuries in layers: operational reserves are held in cash or stable assets to cover expenses, long-term holdings remain as investments but are appropriately hedged, and strategic positions are neither utilized nor jeopardize the organization's survival. The model shows that treasuries held entirely in native tokens would lose years of operational runway in a significant drawdown, whereas separating reserves and protecting long-term holdings can significantly preserve the runway, even without relying on any market rebound.