As of June 2025, DeFi remains a cornerstone of the Ethereum ecosystem. TVL is up to $90 billion and stablecoin market cap currently exceeds $120 billion via major issuers like Tether (50.5% of supply)
2025-06-25 - 6 min read
As of June 2025, DeFi remains a cornerstone of the Ethereum ecosystem. TVL is up to $90 billion and stablecoin market cap currently exceeds $120 billion via major issuers like Tether (50.5% of supply), Circle (30%), Ethena (5.5%) and the remaining 14% spread across 140 issuers. 35 million ETH staked with a 390% surge in whale activity in Q1 2025, indicates growing confidence whilst Visa’s USDG integration for treasury yield access and JP Morgan’s JPMD token are an indicator that the long-awaited institutional interest and accumulation is finally here. Ethereum is making its comeback, with stronger security, decentralization, liquidity, and toolings for treasury managers seeking a fully on-chain experience with battle-tested, modular, non-custodial and permissionless smart contracts. This evolution opens up to a new approach to treasury management - one that is very close to our ethos - as it balances capital preservation with capital optimization, all using mission-aligned strategies within a “Defipunk” framework. P.A.L.O. Investment Guidelines In our view, DAO treasury management must balance four core objectives and must adhere to a robust set of operational guardrails that are native to each specific ecosystem. Internally, we refer to this framework as P.A.L.O. (Preservation, Alignment, Longevity, Optimization). These principles serve as a north star, guiding our approach to sustainable treasury management as explained below: Capital Preservation : Safety first. Without protecting assets from hacks, volatility, or systemic risks, a DAO cannot function or achieve its mission. This is the bedrock of treasury management. P.A.L.O guidelines minimizes exposure to unproven smart contract protocols, favoring battle-tested, industry-leading open-source platforms to enhance security. Mission-Aligned Capital : Investment decisions must reflect the DAO’s non-negotiable values to maintain its integrity. Misaligned incentives erode credibility and destabilize the protocol. Treasury managers must align protocols’ interests and community goals, favoring permissionless, censorship-resistant systems and prioritizing on-chain settlement over opaque, off-chain backroom deals. This approach minimizes reliance on native asset liquidations and rejects high-risk, speculative investments in favor of predictable, low-risk opportunities that uphold “Defipunk” values. Protocol Longevity : Longevity means calculating operating costs and ensuring sufficient resources to sustain protocol operations over time. Ensuring sufficient resources for multi-year operations can help DAOs avoid financial strain, and ensure their treasury supports long-term ecosystem development. Capital Optimization : Generating yields isn’t a must, but it enhances financial flexibility, and allows to support growth and extend protocols’ runway. The Ethereum Foundation’s Treasury Policy (June 4, 2025) exemplifies this by maintaining a 2.5-year operational expenditure (opex) buffer in low-risk, liquid assets. Other approaches such as stablecoin looping strategies, on-chain covered calls and tokenized real-world assets are just some of the additional approaches DAOs can use to optimize capital efficiency. Optimization Strategies Defipunk meets P.A.L.O. where at the core the number one objective is to limit reliance on centralized and opaque practices in favor of more efficient and transparent treasury management. Some of the most common DeFi native strategies for DAOs include, but are not limited to: Stablecoin Strategy: Stablecoins are distributed across lending protocols such as Compound, Aave, Morpho and Euler and are automatically rebalanced to optimize yields. Yields generally come from diversified sources such as delta neutral strategies, T-bills, arbitrage or borrow fees. Ethereum Strategy : Increase yields in a risk-managed way, whilst still capturing potential upside in ETH’s performance. Idle ETH are allocated to lending protocols and flash loans are used to achieve yields that exceed the staking rate. Volatility Targeting : Reduces volatility by adjusting allocations within a trading range for yield and stablecoin diversification. Covered Call Strategy : Convert to stablecoins at higher market levels for short-term diversification, or earning a premium while retaining upside potential, ideal for monetizing volatility without capping long-term gains. Protocol LP : Enhances yields by deploying native and paired tokens to improve liquidity and earn fees. Dynamic Hedging with Tokenized RWAs : Hedges volatility with stable returns from tokenized real-world assets. Private LP : Maximizes yields by funding new protocol launches for native tokens. Decumulator Strategies : Generates yield by selling tokens at strike prices with a knockout barrier to limit downside risk. In addition to token-native strategies, DAOs may also consider traceable investment paths that align with their mission and the P.A.L.O. framework - such as non-token-based investments in early-