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Treasury Diversification

Acquire assets that are strategic to your protocol via bonding
Typically DAO's treasuries are asset-rich in the protocols' native tokens.
While there is no centralized body that defines the General Accepted Accounting Principles (GAAP) for the protocols in the cryptography space to how a protocol's balance sheet should be reported, it has been demonstrated a protocol's treasury concentrated with its native token has a higher probability of being decimated vs. one that is well-diversified with blue-chips and resilient stablecoins when going through the ebbs and webs of the crypto cycles.

Why diversify

Increase the probability of survival via increased runway

  • During times of market distress, "Mr Market" does not care about your FDV. In fact, increasing the circulating supply without supported fundamentals will lead to a rapid downward spiral of the token's price.
  • Stablecoins and blue chip tokens that have a low to negative correlation to the protocol's token price are good candidates for treasury diversification.
  • These can be sold to extend the runway to ride out crypto winter periods increasing the likelihood of survival. The aim is to accumulate enough to survive the next bear market.

Improved liquidity

  • A treasury with a concentrated position (circulating and exacerbated by non-circulating) in the protocol's native token might face liquidity issue when there is a "bank run" on its token. This could be a coordinated attack by short sellers who run a narrative to profit from the token price drop.

Improved resilience

  • First, by understanding the protocol's application-specific risks in terms of counterparts' liabilities and hedging them via accumulating via bonding.