Merit Circle is one of the leading DAOs in the crypto space and a prominent figure in the crypto gaming industry. They have built a robust treasury to sustain growth across market cycles. Let’s dive into their treasury management strategies and identify best practices that can be applied across the DAO ecosystem.

Key Highlights from Merit Circle’s Treasury Management

1. Excluding Native Tokens from Liquid Treasury

Merit Circle strategically excludes their native token, $BEAM, from their liquid treasury. Although they hold nearly half a billion dollars in $BEAM, their treasury page lists only $120 million in assets. This approach prevents the need to sell native tokens to cover operational costs, which could trigger a downward price spiral and lead to additional sales.

Note: Selling native tokens to cover costs can create a cycle of forced selling, leading to token price drops, which then demand further sales. Fyde Treasury helps avoid this scenario, but DAOs should be cautious about relying on native governance tokens as primary working capital.

2. Diversification of Treasury Assets

Merit Circle has effectively diversified its treasury to minimize volatility. Their holdings include $3.8 million in BTC, $2.2 million in Shrapnel, $1.4 million in Inspect, and other assets. Diversification like this reduces risk and adds stability. Additionally, they incorporate various LP pools, likely due to the yield generation benefits, which are essential for asset-liability management — the cornerstone of effective treasury management.

3. Yield Generation as a Treasury Pillar

With approximately $11 million in liquidity pools, Merit Circle actively generates yield. Their trading volume is notably high, with the BEAM/WETH pool on Uniswap V2 achieving $8.5 million in 24-hour volume.

For example:

• Merit Circle holds $5.8 million in the $11.5 million BEAM/WETH Uni V2 pool, generating $25.5K in fees within 24 hours. Assuming average daily trading volume at $6 million, Merit Circle would yield approximately $3.3 million annually from fees, potentially covering their operational expenses.

This approach exemplifies how treasuries can be structured to produce enough yield to offset their liabilities — an ideal model for sustainable treasury management.

Positioned for Future Success

As we approach the next bull run, Merit Circle is well-positioned to capitalize on their treasury strategy. Fyde Treasury has proudly advised Merit Circle on allocation and strategy, supporting their mission to optimize for growth and resilience.

For more details on Merit Circle’s approach and Fyde’s role, read our full article here.