A new report from GSR Markets reveals that more than 70% of DAO treasury assets are held in each project's own native token, creating a procyclical vulnerability that has repeatedly destabilized decentralized organizations during market downturns.

GSR, a London-based digital asset trading and market-making firm, published the findings on August 7. The data shows that the remaining 30% of DAO treasury holdings are spread across stablecoins, ETH, Bitcoin, and other assets. While that ratio marks an improvement from 2023—when native token concentration among top DAOs stood closer to 82%—the structural risk remains substantial.

Collectively, DAO treasuries surpassed $26 billion as of Q1 2026. However, the majority of those assets are denominated in tokens whose value can fluctuate 30–50% within weeks. This concentration issue is not new: since the earliest wave of DAOs began managing meaningful capital in 2020–2021, treasury diversification has been a recurring topic in governance forums, with mixed adoption across major protocols.

The Procyclical Problem

GSR identifies the core issue as a set of procyclical dynamics. When a native token's price declines, three effects compound simultaneously: the treasury's dollar-denominated value shrinks, protocol revenue—often generated in the native token—falls, and the DAO faces mounting pressure to sell additional tokens to cover expenses such as developer salaries, security audits, and infrastructure costs that are priced in dollars.

That selling introduces further downward pressure on the token price, which shrinks the treasury even more and forces additional liquidation. The result is a self-reinforcing feedback loop that has materialized in prior downturns, including the market contractions of 2022 and early 2023, when several prominent DAOs were forced to curtail development programs or restructure operations after their native token reserves lost significant value.

Governance and Incentive Barriers to Diversification

The report notes that this cycle has repeated across multiple market downturns, with projects typically pursuing hedging solutions only after prices have already dropped significantly.

Diversification faces resistance on several fronts. Selling native tokens during favorable market conditions can be politically sensitive within DAO communities, as token holders frequently interpret such moves as a signal of diminished confidence in the project. Governance proposals to convert native tokens into stablecoins or assets like ETH often encounter pushback, even when the financial rationale is well-supported. Several high-profile DAOs, including Uniswap and Arbitrum, have debated diversification proposals in on-chain votes, with outcomes ranging from partial adoption to rejection.

A structural incentive conflict also exists. Many DAO contributors hold substantial amounts of their own project's native token, giving them a personal stake in avoiding actions that could create short-term selling pressure. This produces a collective action problem: while diversification may be broadly acknowledged as prudent, few are willing to advance the proposal.

GSR's Recommended Framework

The report recommends that DAOs segment their treasuries into two categories: operating reserves and long-term holdings.

Operating reserves—funds needed to cover 12 to 24 months of runway—should be maintained in stablecoins or cash equivalents. Long-term holdings may remain in native tokens or other growth-oriented assets, provided hedging strategies are implemented.

GSR specifically recommends options structures such as collars. A collar strategy involves purchasing downside protection through a put option while simultaneously selling upside exposure via a call option to offset the cost. The DAO forgoes some potential gains in exchange for a defined floor on losses. Such structured products have become more accessible to DAOs as regulated counterparties and on-chain derivatives infrastructure have matured.

GSR offers OTC, derivatives, and hedging services, giving the firm a commercial interest in wider adoption of these strategies. Nonetheless, the underlying analysis highlights a persistent vulnerability: concentrated treasuries have plagued DAOs for years, and the reduction from 82% to 70% native token concentration between 2023 and 2026 indicates gradual improvement, though at a pace many would consider insufficient.

Market Implications

For those evaluating DAO-governed protocols, treasury composition warrants close scrutiny. A project reporting $500 million in treasury assets presents a very different risk profile when $350 million of that total consists of an unhedged native token.

If a meaningful share of the $26 billion held across DAO treasuries were forced into liquidation during a market downturn, the resulting selling pressure would ripple through decentralized exchanges, aggregator platforms, and ultimately centralized trading venues. The concentration of native tokens in DAO treasuries represents not only a governance challenge but a systemic liquidity risk embedded in the funding architecture of most decentralized organizations. As DAO-governed protocols continue to grow in total value locked and user base, the adequacy of their treasury management practices is likely to draw increasing attention from institutional participants, auditors, and frameworks assessing protocol-level risk.