BlackRock sees record “whale” demand to swap BTC into IBIT even as ETF investors pull cash BlackRock says an increasing number of large Bitcoin holders are converting self-custodied BTC into shares of its iShares Bitcoin Trust (IBIT), driven largely by security concerns and a desire to hold exposure via regulated products. Robbie Mitchnick, BlackRock’s head of digital assets, told Barron’s on November 9 that the firm has handled roughly $3.6 billion in Bitcoin-to-IBIT in-kind conversions since U.S. regulators approved such transactions in July 2025 — and the real total could be higher because BlackRock doesn’t directly track every intermediary-led transfer. “Highest we’ve seen at any point,” Mitchnick said, describing demand from wealthy individuals and institutions who want “security and peace of mind” instead of managing large private keys and custodial risk themselves. How the conversions work - Eligible holders deliver Bitcoin to the ETF structure through authorized participants and approved intermediaries and receive IBIT shares in return — a process that moves exposure into brokerage accounts without a preliminary sale to cash. - BlackRock works with intermediaries including Galaxy Digital, Talos and Virtu to arrange these creations. - The practical minimum ticket size has fallen sharply: historically around $30 million, it’s now commonly around $1–2 million, broadening access beyond the largest whales. BlackRock formally lowered conversion thresholds during 2026 as institutional demand grew. - Tax consequences depend on each investor’s situation and how the transfer is structured; an in-kind transfer does not automatically eliminate taxable events. Conversions rise as ETF flows shrink The surge in in-kind conversions comes amid sustained net outflows from U.S. spot Bitcoin ETFs, including from IBIT itself: - IBIT recorded $213.2 million in net outflows on November 9 — its seventh straight session of withdrawals — and about $1.66 billion in net redemptions since October 30. - Across U.S. spot Bitcoin ETFs, Monday’s net outflows were $201 million; Morgan Stanley’s MSBT took in $22.1 million, partially offsetting broader withdrawals. - The prior session saw $411.9 million leave spot Bitcoin ETFs, with roughly $403 million coming from IBIT. - In the first trading week of November, spot Bitcoin ETFs suffered about $1.28 billion in net withdrawals, of which IBIT accounted for roughly $1.21 billion. It’s important to differentiate activities: in-kind conversions are transfers of existing crypto into an ETF and do not necessarily represent new capital entering the market, while net flows track the balance of creations versus redemptions (cash or crypto) across funds. Bitcoin’s price has been hovering near $75,000 during this period, a backdrop to both flows and conversions. Regulatory shift enabled in-kind moves The U.S. Securities and Exchange Commission approved in-kind creations and redemptions for crypto exchange-traded products on July 29, 2025, aligning crypto ETF mechanics more closely with commodity ETFs. SEC Chairman Paul Atkins said the change would make the products “less costly and more efficient.” Before that, U.S. spot Bitcoin and Ethereum funds typically used cash-based creations and redemptions. Industry response Other managers have rolled out similar options for large holders. On October 21, Grayscale announced in-kind contributions across ten digital asset products — from Bitcoin and Ethereum to Solana, Dogecoin and Zcash — with published minimums ranging roughly from $80,300 (Solana Staking ETF) to $364,800 (Bitcoin Mini Trust). Grayscale’s Steve Vanourny highlighted institutional custody’s rising importance amid “growing cybersecurity threats” tied to self-custody and DeFi. Bottom line BlackRock’s in-kind conversion demand underscores a growing preference among big holders for regulated custody and tradable exposure inside brokerage accounts, even as retail and institutional flows into spot Bitcoin ETFs show intermittent redemptions. For eligible investors, conversions offer a way to migrate crypto into mainstream investment infrastructure — but they don’t necessarily change market liquidity the way fresh inflows or outflows do, and tax and operational details still matter. Read more AI-generated news on: https://app.chaingpt.org/news