Imagine running a company where 70% of your cash reserves are held in your own stock. Every time the stock drops, your ability to pay employees, fund development, and keep the lights on drops right alongside it. Now imagine that when you finally try to sell some of that stock to cover bills, the act of selling pushes the price down further.
That’s not a hypothetical. It’s how most DAOs operate their treasuries, according to a new report from GSR Markets.
The concentration problem
GSR, a London-based digital asset trading and market-making firm, published findings on August 7 showing that more than 70% of DAO treasury assets sit in each project’s own native token. The remaining 30% is spread across stablecoins, ETH, Bitcoin, and other holdings. That ratio is actually an improvement from 2023, when the concentration figure was closer to 82% among top DAOs.
DAO treasuries collectively surpassed $26 billion as of Q1 2026. That sounds like a healthy war chest until you realize the vast majority of it is denominated in tokens whose value can swing 30-50% in a matter of weeks.
The core issue is what GSR describes as procyclical dynamics. When a token’s price falls, three things happen simultaneously: the treasury’s dollar value shrinks, protocol revenue (often denominated in the native token) declines, and the DAO faces pressure to sell more tokens to cover dollar-denominated expenses like developer salaries, audits, and infrastructure costs. That selling puts additional downward pressure on the token price, which shrinks the treasury further, which forces more selling.
Why DAOs keep making the same mistake
The pattern isn’t new. GSR’s report emphasizes that this cycle has repeated across multiple market downturns, with projects consistently seeking hedging solutions only after prices have already cratered.
Selling native tokens during good times can be politically toxic within a community. Token holders often view diversification efforts as a lack of confidence in the project. Proposals to convert native tokens into stablecoins or blue-chip assets like ETH frequently face governance resistance, even when the financial logic is airtight.
There’s also a structural incentive problem. Many DAO contributors hold significant amounts of the native token themselves, meaning they’re personally incentivized to avoid any action that could put short-term selling pressure on the price. The result is a collective action failure where everyone agrees diversification would be smart in theory, but nobody wants to be the one who proposes it.
What GSR recommends
The report advocates for a straightforward framework. DAOs should separate their treasuries into two buckets: operating reserves and long-term holdings.
Operating reserves, meaning the funds needed to cover 12-24 months of runway, should be maintained in stable assets or cash equivalents. Long-term holdings can remain in native tokens or other growth-oriented assets, but with hedging strategies in place.
GSR specifically recommends options structures like collars as a hedging mechanism. A collar involves buying downside protection (a put option) while simultaneously selling some upside (a call option) to offset the cost. The DAO gives up some potential gains in exchange for a floor on losses.
GSR, which offers OTC, derivatives, and hedging services, obviously has a commercial interest in DAOs adopting these strategies. But the underlying analysis is hard to argue with: concentrated treasuries have been a recurring vulnerability for years, and the improvement from 82% to 70% native token concentration between 2023 and 2026 suggests the industry is moving in the right direction, just not fast enough.
What this means for the market
For investors evaluating DAO-governed protocols, treasury composition should be a first-order concern. A project sitting on $500 million in treasury value sounds impressive until you learn that $350 million of it is in a token with no hedging in place.
If a meaningful portion of $26 billion in DAO treasuries is forced to liquidate native tokens during a downturn, that selling pressure ripples across decentralized exchanges, aggregators, and eventually centralized venues. It’s not just a governance problem. It’s a systemic liquidity risk baked into the architecture of how most DAOs fund themselves.