Digital asset treasuries (DATs) have surged to approximately $135 billion in total holdings, but investment firm VanEck has issued a cautionary note for Ethereum (ETH) investors. According to their latest report, ETH holders who do not stake their tokens may face increasing dilution risk as Ethereum transitions from a fee-driven yield model toward a more monetary asset framework.

With Layer 1 fee revenues declining and staking participation on the rise, VanEck warns that non-stakers could see their long-term value proposition erode. Staking rewards continue to compound for active validators, while passive holders experience a decreasing share of the total ETH supply.

The DAT Boom and Its Fragile Foundation

VanEck’s September report highlights the meteoric rise of digital asset treasuries, led by firms like Bitmine Immersion Technologies and Strategy. However, the firm expressed concerns about the sustainability of this boom, noting that DATs are heavily dependent on volatility-driven funding mechanisms.

These entities, described as “volatility reactors,” rely on persistent market turbulence to finance ongoing cryptocurrency purchases. With Bitcoin’s 30-day volatility steadily declining over the past decade, VanEck questions whether this engine of growth can endure in calmer markets.

Adding to the uncertainty, several major DATs—including Semler Scientific, Strive, KindlyMD, and Empery Digital—are now trading below their net asset values (NAVs). A recent Bitmine capital raise at a steep 75% discount to NAV further underscores the fragility of the current DAT landscape.

Ethereum’s Fusaka Upgrade Could Deepen Dilution Divide

Adding another layer of complexity is Ethereum’s upcoming Fusaka upgrade, scheduled for December 3. Co-founder Vitalik Buterin describes Fusaka as Ethereum’s most ambitious scaling initiative yet. The upgrade introduces PeerDAS, a data-availability sampling system allowing validators to verify smaller, random data segments instead of full blocks. This innovation aims to more than double Ethereum’s blob capacity, boosting throughput while lowering costs for Layer 2 networks.

However, VanEck warns that increased Layer 2 adoption could erode mainnet fee revenue further, intensifying dilution for non-staking ETH holders. As more transactions move off-chain, direct fee income—the primary source of yield for non-stakers—may shrink, even as staking rewards remain concentrated among active validators.

Institutional Accumulation Accelerates Despite Risks

Despite these warnings, institutional interest in Ethereum remains strong. Bitmine expanded its ETH holdings by $69 million via Galaxy Digital’s OTC desk on September 19, bringing its total to roughly 1.95 million ETH, valued at around $8.66 billion.

Other institutional players are following suit. SharpLink Gaming has accumulated 838,152 ETH, generating over 3,200 ETH in staking rewards since June, while The Ether Machine added 150,000 ETH ahead of its planned merger with Dynamix Corporation. Collectively, these corporate acquisitions represent nearly 3.1% of Ethereum’s circulating supply, underscoring growing confidence in ETH as a long-term reserve asset.

Contrasting Views: Standard Chartered Sees Opportunity

While VanEck raises alarms over dilution, Standard Chartered analysts offer a more optimistic perspective. Geoffrey Kendrick, head of digital assets research, argues that Ethereum could outperform Bitcoin within the DAT ecosystem.

Kendrick highlights Ethereum’s yield-bearing nature and evolving role as “digital infrastructure,” suggesting that staking yields justify higher market-to-NAV premiums than Bitcoin-based treasuries. According to the bank, Ethereum treasuries have already absorbed 3.1% of total supply since June—a sign that institutions increasingly view ETH as a productive, compounding asset rather than merely a speculative investment.

The Road Ahead

As the Fusaka upgrade approaches, Ethereum sits at a critical crossroads. The network’s evolution toward scalability and Layer 2 efficiency is undeniably bullish for usability and adoption. Yet, it also reshapes the economic incentives underpinning ETH ownership.

For stakers, the future may appear increasingly lucrative, offering compound rewards and higher potential yields. For non-stakers, however, VanEck’s warning serves as a stark reminder: Ethereum’s transition into a monetary settlement layer could reduce passive value retention.

Investors must now weigh the benefits of staking against potential dilution, consider institutional signals, and monitor Layer 2 adoption trends closely. As Ethereum continues to expand its infrastructure, the decisions made today by individual and institutional holders alike may determine long-term outcomes in the evolving digital asset landscape.