The bull market has caused DAO treasuries to balloon over the past year, with the top ten treasuries now possessing balance sheets worth hundreds of millions, or in some cases, billions of dollars.
However, DAOs in their current form are set up for financial failure.
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However, DAOs in their current form are set up for financial failure.
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Nearly all of the top treasuries have the entirety of their assets in their native token and don't hold a notable % allocation of stablecoins or less volatile assets like Ether or Bitcoin.
Effectively, most protocol treasuries are subject to the turbulence of the market.
Effectively, most protocol treasuries are subject to the turbulence of the market.
Proper risk management ensures protocols have sufficient capital to cover immediate expenses and weather uncertain tides.
Read the Messari Enterprise Report for an analysis on how DAOs can restructure to avoid significant loss if the market corrects.
messari.io/article/a-cris…
Read the Messari Enterprise Report for an analysis on how DAOs can restructure to avoid significant loss if the market corrects.
messari.io/article/a-cris…
The crisis in capital management holds true for not just large DAOs, but nearly all of them.
After filtering treasuries based on their adjusted balance sheets, we see that most DAOs hold almost the entirety of their assets in their native token.
After filtering treasuries based on their adjusted balance sheets, we see that most DAOs hold almost the entirety of their assets in their native token.
While understandable, this results in a dangerous scenario for protocols and means most DAOs are without any short or medium-term capital management plans.
Crypto protocols are built to be antifragile, however most protocol treasury portfolios are incredibly fragile.
Analysis from @RobertoTalamas shows what happens in the event of a small market correction or black swan event (spoiler: it's not pretty).
Analysis from @RobertoTalamas shows what happens in the event of a small market correction or black swan event (spoiler: it's not pretty).
https://twitter.com/RobertoTalamas/status/1392831041086230531?s=20
A rising tide raises all ships, but when the moon sets, darkness falls upon a market that tanks 40% overnight.
Suddenly, the gravitational pull weakens and the tide that raises ships in the good times, lowers them disproportionately. Prepare accordingly.
messari.io/article/a-cris…
Suddenly, the gravitational pull weakens and the tide that raises ships in the good times, lowers them disproportionately. Prepare accordingly.
messari.io/article/a-cris…
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