Some of Bitcoin’s biggest holders, popularly known as whales, are quietly moving billions of dollars’ worth of coins into spot exchange-traded funds (ETFs).
On Oct. 21, Bloomberg reported that these whales executed roughly $3 billion in in-kind transfers through BlackRock’s iShares Bitcoin Trust (IBIT). Instead of selling, they handed their Bitcoin to the ETF in exchange for fund shares, a process known as custom creation.
Notably, this migration was made possible by a July 2025 SEC policy change approving in-kind creations and redemptions for crypto ETFs. The rule lets authorized participants deliver the underlying Bitcoin rather than cash, aligning digital-asset funds with commodity ETF practices used for gold or oil.
Meanwhile, this move presents a structural shift that could redefine how the flagship digital asset functions within global markets.
Bloomberg ETF analyst Eric Balchunas described it as a turning point, noting that even long-time crypto purists recognize traditional finance’s advantages.
He said:
“Tradfi (ETFs in particular) is more badass than crypto thinks.”
Why are Bitcoin whales turning to ETFs?
Nicolai Søndergaard, a research analyst at Nansen, told CryptoSlate that the ETF creations allow whales to defer taxes by swapping Bitcoin for fund shares.
According to him, this helps these cohorts to preserve their BTC exposure without selling. He also noted that the actions are “bullish because it removes Bitcoin from circulation.”
However, he pointed out that the “downside is not being able to trade 24/7 and having to stick to normal trading hours, but it is likely that these whales aren’t active traders anyway.”
Meanwhile, analysts at Bitunix told CryptoSlate that Bitcoin whales engage in these portfolio trades because the move transforms their decentralized wealth into assets recognized by traditional finance.
According to them:
“This marks a deeper phase of institutional integration for crypto markets. Bitcoin is evolving from an anti-establishment symbol into a regulated asset class, redefining its capital efficiency and legitimacy.
For institutional players, the ETF structure enables leverage, compliance, and formal inclusion within multi-asset portfolios—making Bitcoin a viable liquidity component alongside bonds and equities.”
However, they cautioned that this evolution comes with a trade-off. As more Bitcoin becomes locked within ETFs, the market could split into two distinct layers, “regulated Bitcoin,” functioning as a financialized, collateral-bearing asset, and “on-chain Bitcoin,” maintaining its decentralized, autonomous roots.
Crypto analyst Shanak Anslem Perera echoed this view while arguing that the ETF-held Bitcoin can now be treated as marginable collateral, repo-eligible, and borrowable at rates around 4–6%, all while reserves remain cryptographically verifiable.
Perera explained that this evolution transforms Bitcoin from a volatile trading instrument into a functional financial infrastructure capable of supporting lending and leveraged portfolios.
He claimed:
“This isn’t ‘adoption.’ It’s monetary architecture rewriting itself in real time: decentralized scarcity reprogramming centralized liquidity.”
In addition, Wes Gray, the founder of Alpha Architect, suggested the whales might have taken these actions to protect themselves from attackers. He said:
“[It is] also nice to avoid the wacko dude with a gun who shows up to your house and demands that u transfer 10 btc or it’s game over.”
Notably, the crypto industry has seen an uptick in wrench attacks targeting crypto holders following BTC’s rise to a new all-time high this year.
How will this impact Bitcoin?
Analysts at Bitfinex told CryptoSlate that the growing wave of in-kind ETF creations is neutral to bullish in the short term but structurally bullish over the long run.
They explained that this trend lays the foundation for a financial system where Bitcoin’s decentralized scarcity underpins centralized liquidity.
Considering this, they projected that BlackRock’s iShares Bitcoin Trust (IBIT) could see its assets under management (AUM) rise from $86.8 billion to over $100 billion by November, as tax-deferred conversions continue to absorb coins from self-custody into regulated funds.
While these swaps don’t create new buying pressure, they expand ETF AUM mechanically, tighten the circulating supply through cold-storage custody, and solidify Bitcoin’s role as institutional-grade collateral.
Bitfinex added that the ETF holdings could grow by another 10–15% in Q4, even without significant net inflows.
They noted that this dynamic may trigger a mechanical supply squeeze as the 12 BTC ETFs now hold roughly 1.35 million coins (or 6.8% of Bitcoin’s circulating supply). With fewer coins available on exchanges, the marginal inflows could have an outsized impact on price discovery.
Coupled with the Federal Reserve’s ongoing monetary easing (policy rates currently between 4.00% and 4.25%), this contraction in available supply could amplify upside momentum, potentially driving Bitcoin’s price from around $108,000 today to roughly $140,000 by mid-2026.
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