It is risky for protocols to only have their own governance tokens in their treasury. If Uniswap has only UNI in its treasury and the token price falls by 40%, its balance sheet would also shrink by 40%. This is dangerous because it occurs at a time when the protocol needs to ramp up spending, whether it is LP subsidies, token buybacks, or core... See more

Treasury allocations should ensure that critical expenses can be funded even if the protocol token has a significant drawdown.

The first priority for many large protocol treasuries is to diversify a portion of assets into stablecoins. The stablecoin allocation should at least cover a few years of operating expenses for the treasury.