Crypto treasury firms might face limits as crypto volatility declines, VanEck warns

VanEck analysts warn that cryptocurrency treasury firms may face significant operational challenges as crypto market volatility continues to decline. The investment management firm highlights that active Decentralized Autonomous Treasury (DAT) protocols are currently underpricing volatility to maintain funding for cryptocurrency purchases, a strategy that could become unsustainable.

As Bitcoin and broader cryptocurrency markets experience reduced price swings, treasury management firms utilizing dynamic hedging strategies may struggle with limited liquidity conditions. VanEck's research suggests that declining market volatility could directly impact investor premiums and managed Net Asset Values (mNAVs), potentially undermining the profitability of these DeFi treasury operations.

The analysis points to a critical inflection point for blockchain-based treasury management protocols, which have relied on crypto market volatility to generate returns through arbitrage and hedging mechanisms. As cryptocurrency markets mature and price movements stabilize, these firms may need to adapt their strategies or face reduced effectiveness.

This development could significantly impact the broader DeFi ecosystem, where treasury management protocols play crucial roles in maintaining liquidity and generating yield for cryptocurrency investors and institutional participants.