VanEck Issues Capital Erosion Warning—Here’s What It Means for Bitcoin-Treasury Firms

Key Takeaways

• Issuing shares near NAV can reduce shareholder value and cause erosion.
• VanEck advises firms to pause share offerings and focus on buybacks when premiums disappear.
• Executive compensation should reward NAV per share growth, not Bitcoin volume.
• Companies must balance Bitcoin strategies with clear financial discipline.

VanEck, a global investment firm, has warned companies accumulating Bitcoin as part of their treasuries about capital erosion. 

As an increasing number of companies use Bitcoin as a treasury asset, they need to implement safeguards to avoid trading below net asset value (NAV).

As the Japanese, once hotel-focused company and now publicly traded crypto treasury firm Metaplanet, reaches $1 billion in Bitcoin holdings, Matthew Sigel, VanEck’s Head of Digital Assets Research, highlighted the risk of capital erosion in a post on X.

He cautioned boards and shareholders, advising them to “act with discipline, while they still have the benefit of optionality.”

This article explains what capital erosion is in relation to Bitcoin, how it works, why it can be risky, and what mitigation strategies companies can consider.

Capital Erosion Explained

Capital erosion is the decline in the value of an investment or company. It refers to the loss in the value of the original capital invested, such as in bonds, assets, or profits. Depending on market conditions, it can occur gradually or suddenly.

Capital erosion can occur for internal and external reasons. 

• Internal causes include poor financial performance or company earnings. 
• External reasons include inflation (which can affect bond prices and reduce purchasing power), recession, rising interest rates, and geopolitical instability. 

How Capital Erosion is Linked to Bitcoin-Holding Companies

Due to Bitcoin’s extreme volatility, capital erosion becomes a concern for companies that hold it on their balance sheets. 

When these companies buy Bitcoin and its price later falls, the market value of their holdings drops. This reduces the real value of their assets and can lead to lower stock prices, especially if investors see the company as overly reliant on crypto exposure.

Some firms also raise money through at-the-market (ATM) share offerings, which allow them to sell new shares directly into the market over time, often to buy more Bitcoin. 

If their stock trades close to NAV, issuing more shares does not increase per-share value. Instead, it dilutes existing shareholders. Each share now represents a smaller slice of the same underlying assets. 

Bitcoin Holdings: A Recipe for Capital Erosion?

It is like slicing a chocolate cake into more pieces. The cake grows in flavor and value if the company adds fresh raspberries with the new funds. 

But if there are too many raspberries and not enough cake, or if the raspberries go bad or fall off, everyone ends up with a smaller and less satisfying slice. 

That’s what happens when companies keep piling on Bitcoin without adding real business value or when the market loses trust in the topping. 

The result might look impressive at first, but shareholders are left with less than they expected.

This is not capital formation. It is a form of capital erosion, where value per share declines without real growth in the asset base.

In short, Bitcoin-holding companies face a dual risk: falling asset values from price drops, and dilution from equity issuance at or near NAV. 

These dynamics can erode capital and damage shareholder confidence if not adequately managed.

In light of Strategy’s (formerly Microstrategy) success in accumulating Bitcoin as part of its treasury, a number of companies have followed the same path. 

Taking the case of Metaplanet’s accumulation of Bitcoin, the strategy has been fueled by debt and equity offerings, including $210 million in zero-coupon bonds. 

If Bitcoin’s price stalls, reverses, or even rises without lifting the company’s stock price accordingly, Metaplanet could risk adding more raspberries than the cake can support. 

The result is increased dilution pressure and a weakening of each slice’s value.

While Metaplanet’s strategy has been successful thus far, its continued success will depend on maintaining investor confidence and effectively managing dilution risks.

The same applies to MSTR, which, despite its strong market premium, also relies on shareholder trust and responsible financing to sustain its Bitcoin-focused strategy. However, its approach relies on less speculation.

Case Study: Semler Scientific’s Approach

However, this strategy does not come without risks or erosion.

The Semler’s case has become a leading example to explain the dangers of capital erosion using Bitcoin.

Semler Scientific, a medical technology company initially focused on marketing and services for healthcare providers, announced in May 2024 its shift toward Bitcoin in an attempt to make it its primary treasury asset. 

By June 2025, it had amassed 4,449 BTC, with a specific target of reaching 10,000 by the end of the year, aiming to become one of the largest Bitcoin holders. 

To achieve this, Semler has developed a number of mechanisms based on equity, debt, and ATM share offerings. Despite Bitcoin’s price increasing, Semler’s shares have gone down. 

This may be due to market sentiment, dilution concerns, or skepticism about its non-core focus. 

The stock is now trading close to its NAV.

Nearly 88% of Semler’s market cap is backed by its Bitcoin holdings.

Using Bitcoin Strategically: How Companies Can Tackle Capital Erosion Risks

Bitcoin can be a powerful treasury tool, but it can weaken per-share value without caution. VanEck recommends the following actions to help companies manage capital erosion risks:

• Pause ATM share offerings: Companies should stop issuing new shares if the stock trades below 0.95 times NAV for ten or more trading days. Issuing at or below NAV dilutes shareholder value.
• Prioritize buybacks when Bitcoin rises: If Bitcoin’s price increases but the company’s stock does not follow, it is better to buy back shares instead of purchasing more Bitcoin.
• Tie executive compensation to NAV per share: Rewards should focus on growing value per share, not on increasing total Bitcoin holdings or market size.
• Launch a strategic review if the discount persists: If the stock stays below NAV, the company should review its position. Options include buybacks, restructuring, or adjusting the treasury approach.
• Keep Bitcoin part of a balanced strategy: Bitcoin should serve a clear financial purpose. Using it as a standalone strategy without business growth can damage investor trust and reduce long-term value.

These actions help companies protect shareholders while still benefiting from Bitcoin’s role as a long-term asset.

Conclusion

Capital erosion is becoming a real risk for companies adding Bitcoin to their balance sheets. As more firms follow MicroStrategy’s example, they face not only price volatility but also financial exposure when stock values fail to keep pace with their BTC reserves. 

When new shares are issued too close to NAV, each investor ends up holding a smaller piece of the same pie or in this case, a thinner slice of chocolate cake.

VanEck has stepped in with a clear warning. Firms must take action before their equity premiums disappear. 

That means pausing ATM offerings when the stock drops below 0.95x NAV, prioritizing buybacks when Bitcoin rises, and tying executive pay to per-share performance rather than the size of the Bitcoin stack. Without these safeguards, companies risk eroding capital instead of forming it.

The cases of Metaplanet and Semler Scientific show two very different outcomes. One has gained investor trust and momentum so far, while the other, despite building its Bitcoin position, has seen its stock drop close to NAV. 

The lesson is clear: Bitcoin alone doesn’t build value. Without discipline, strategy, and strong fundamentals, a treasury full of BTC can collapse into a cautionary tale of dilution and market doubt.

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