Significant holders of Bitcoin, often referred to as whales, are reportedly shifting substantial amounts, valued in the billions, of their digital assets into spot exchange-traded funds (ETFs).
According to an Oct. 21 report by Bloomberg, these major players have executed approximately $3 billion in “in-kind” transfers via BlackRock’s iShares Bitcoin Trust (IBIT). This process involves exchanging their Bitcoin holdings directly for ETF shares, a practice termed “custom creation,” rather than outright selling their cryptocurrency.
This transition became viable due to a July 2025 policy shift by the SEC, which authorized in-kind creations and redemptions for crypto ETFs. This regulation allows authorized participants to contribute actual Bitcoin, instead of cash, mirroring the established practices for commodity ETFs dealing in assets such as gold or crude oil.
This activity indicates a significant structural alteration that could reshape how Bitcoin operates within the broader global financial system.
Bloomberg ETF expert Eric Balchunas characterized it as a pivotal moment, noting that even those traditionally aligned with crypto’s original ethos are recognizing the advantages offered by conventional finance.
He stated:
“Traditional finance (particularly ETFs) possesses more strength than the crypto community perceives.”
Why are Bitcoin whales adopting ETFs?
Nicolai Søndergaard, a research analyst with Nansen, explained to CryptoSlate that the creation of these ETFs enables whales to postpone tax liabilities by exchanging Bitcoin for shares in the fund.
He suggests that this strategy assists these large holders in maintaining their exposure to BTC without the necessity of selling. He also emphasizes that these actions are “positive, as they reduce the circulating supply of Bitcoin.”
However, he also observed that “the drawback involves the inability to engage in trading 24/7 and adherence to standard trading hours, although it’s probable that these whales are not particularly active traders.”
Analysts at Bitunix conveyed to CryptoSlate that Bitcoin whales utilize these portfolio transactions to transform their decentralized wealth into assets that are recognized within established financial frameworks.
They noted:
“This signifies a deepening phase of crypto market integration with traditional finance. Bitcoin is transitioning from an anti-establishment symbol to a regulated asset class, enhancing its capital efficiency and legitimacy.
For institutional participants, the ETF structure provides leverage, regulatory compliance, and formal integration within diverse asset portfolios, establishing Bitcoin as a viable liquidity component alongside conventional assets like bonds and stocks.”
They also cautioned that this evolution presents a trade-off. As more Bitcoin is locked within ETFs, the market might bifurcate into two distinct segments: “regulated Bitcoin,” which acts as a financialized asset used for collateral purposes, and “on-chain Bitcoin,” retaining its original decentralized and autonomous characteristics.
Crypto analyst Shanak Anslem Perera supported this perspective, suggesting that ETF-held Bitcoin can now be treated as marginable collateral, eligible for repurchase agreements, and available for borrowing at interest rates around 4–6%, all while maintaining cryptographically verifiable reserves.
Perera elaborated that this change is converting Bitcoin from a volatile trading instrument into a functional financial infrastructure capable of supporting lending and leveraged portfolios.
He argued:
“This isn’t mere ‘adoption.’ It’s the real-time rewriting of monetary architecture: decentralized scarcity reconfiguring centralized liquidity.”
Furthermore, Wes Gray, the founder of Alpha Architect, proposed that whales might be acting to protect themselves from potential attacks. He commented:
“[It is] also beneficial to avoid the unstable individual with a weapon who might visit your home demanding the transfer of 10 BTC or face dire consequences.”
The crypto industry has indeed seen an increase in “wrench attacks” aimed at crypto holders, coinciding with BTC reaching new all-time highs this year.
What is the potential impact on Bitcoin?
Analysts at Bitfinex stated to CryptoSlate that the growing trend of in-kind ETF creations is neutral to positive in the immediate term but structurally bullish in the long term.
They clarified that this trend establishes a foundation for a financial system where Bitcoin’s inherent scarcity underpins centralized liquidity.
In light of this, they forecast that BlackRock’s iShares Bitcoin Trust (IBIT) could see its assets under management (AUM) increase from $86.8 billion to over $100 billion by November, as conversions avoiding immediate tax consequences continue to transfer coins from self-custody into regulated funds.
While these exchanges don’t generate new buying pressure, they do mechanically expand ETF AUM, reduce the circulating supply through cold-storage custody, and reinforce Bitcoin’s status as institutional-grade collateral.
Bitfinex added that ETF holdings could expand by an additional 10–15% in Q4, even without significant net inflows.
They pointed out that this dynamic could trigger a mechanical supply squeeze, as the 12 BTC ETFs collectively hold roughly 1.35 million coins (or 6.8% of the total Bitcoin circulating supply). With fewer coins accessible on exchanges, incremental inflows could exert a disproportionately large impact on price discovery.
Combined with the Federal Reserve’s ongoing efforts to ease monetary policy (policy rates currently between 4.00% and 4.25%), this reduction in available supply could amplify upward momentum, potentially driving Bitcoin’s price from around $108,000 today to approximately $140,000 by mid-2026.