DOT for BTC? Polkadot Proposal Sparks Controversy Over Treasury Allocation

The Polkadot community is divided on a proposal to sell 500,000 DOT tokens in a decision to establish a Bitcoin reserve, exposing tensions over treasury management in a challenging market environment.

Polkadot Proposal Outlines $2.04M Bitcoin Diversification Plan

According to a Polkadot forum post, the proposal is to convert 500,000 DOT—valued at approximately $2 million at the current price of $3.80—into Threshold Bitcoin (tBTC) over the course of a year using a dollar-cost averaging (DCA) strategy through Hydration’s “rolling DCA” feature. 

The Proposal (Source: Polkadot’s Forum)

The tBTC would be allocated as liquidity in the Hydration Omnipool to diversify the the project’s treasury, create DeFi incentives, and boost long-term financial sustainability. 

Supporters argue that Bitcoin’s store-of-value status makes it a strategic hedge, comparing the action to the Ethereum Foundation’s diversification efforts. The proposal is scheduled for an on-chain vote early next week, with the community encouraged to engage on platforms like X and the Polkadot forum.

Is Now the Right Time for a Bitcoin Reserve?

The proposal has sparked different reactions within the Polkadot ecosystem. Supporters, including Polkadot’s instructors Alice and Bob, see the Bitcoin reserve as a forward-thinking measure to collateralize the ecosystem. 

With members describing it as a “great initiative,” emphasizing Bitcoin’s global influence. Forum discussions point to the proposal’s focus on risk management, similar to that of corporate strategies like Berkshire Hathaway’s T-Bill holdings.

While critics question the timing, referencing Bitcoin’s current price at $104,821 and DOT’s current price at $3.80, labeling the plan as a “joke,” warning that selling DOT at a low could trigger downward price pressure while buying Bitcoin at a peak. 

BTC and DOT Price Chart (Source: TradingView)

A Medium article raised concerns about using another volatile asset to stabilize the treasury, with some proposing a smaller-scale trial of 50,000 DOT. Alternative proposals in the forum include investing in T-Bills or real-world assets, such as solar farms, through the Community Fund to ensure sustainable ecosystem funding.

Vote to Decide $2M Bitcoin Treasury Strategy

DOT is trading near its all-time low, down 93% from its November 2021 peak of $55.13, while Bitcoin continues a bullish rally above $104,821.

The Polkadot Treasury’s recent allocation of $10 million in DOT for DeFi liquidity in 2024 reveals its active approach, but the Bitcoin proposal exposed a lack of consensus on long-term priorities. 

Polkadot Treasuries (Source: Polkadot’s Forum)

Community engagement is increasing, with members calling for further discussion. The upcoming vote will test the project’s ability to align innovation with fiscal discipline, possibly influencing its governance and treasury strategy going forward.