In a notable trend within the cryptocurrency landscape, substantial Bitcoin holders, often referred to as “whales,” are increasingly moving vast amounts of their assets into spot exchange-traded funds (ETFs). According to a report from Bloomberg on October 21, this movement reflects a significant shift in the way institutional players are engaging with Bitcoin.
On that date, it was revealed that whales had executed approximately $3 billion in in-kind transfers through BlackRock’s iShares Bitcoin Trust (IBIT). Rather than selling their precious Bitcoin, these significant players opted to exchange their holdings for shares of the ETF—a process known as custom creation. This strategy allows them to maintain exposure to Bitcoin while simplifying the management of their investments.
Central to this migration is a pivotal change in policy by the U.S. Securities and Exchange Commission (SEC) in July 2025. The SEC approved guidelines permitting in-kind creations and redemptions for crypto ETFs, marking a critical juncture for how these funds operate. This rule allows authorized participants to deliver actual Bitcoin instead of cash, aligning the practices of digital asset funds with those typically applied to commodity ETFs like gold and oil. This fundamental shift might redefine Bitcoin’s role and accessibility within global markets.
Why are Bitcoin whales turning to ETFs?
Several factors are motivating Bitcoin whales to embrace ETFs. Nicolai Søndergaard, a research analyst at Nansen, highlights that these ETF creations allow whales to defer taxes effectively. By swapping Bitcoin for fund shares, they can preserve their holdings without triggering tax liabilities associated with selling their assets. This move is deemed bullish, given it effectively withdraws Bitcoin from circulation, reducing available supply.
However, Søndergaard also notes a downside: investing in ETFs typically means relinquishing the flexibility of 24/7 trading, adhering instead to standard trading hours. Yet, he rationalizes that most whales are not particularly active traders, making this restriction less crucial.
Analysis from Bitunix further elaborates on why these large holders are shifting their portfolios. They argue that this strategic move transforms decentralized wealth into assets recognized by the traditional finance sector. The authors assert that this reflects a deeper integration of institutional forces into the cryptocurrency space, evolving Bitcoin from a staunch anti-establishment symbol into a regulated asset class. This development enhances Bitcoin’s capital efficiency and legitimacy.
Importantly, as more Bitcoin finds its way into ETFs, the market may evolve into two distinct layers: “regulated Bitcoin” representing a financialized asset, and “on-chain Bitcoin” retaining its decentralized ethos. Crypto analyst Shanak Anslem Perera emphasizes that Bitcoin held within ETFs could now be classified as collateral, potentially augmenting its role within lending and other financial infrastructures. This evolution signifies a transformation from a volatile trading instrument to a functional component of financial scaffolding.
Additionally, Wes Gray, founder of Alpha Architect, offers a pragmatic perspective, stating that one reason whales might prefer ETFs is to shield themselves from potential theft or coercion. In a world where high-net-worth crypto holders are increasingly targeted for their assets, shifting to ETFs can mitigate the risk associated with physically holding large amounts of Bitcoin.
How will this impact Bitcoin?
As this trend towards in-kind ETF creations grows, analysts at Bitfinex have discerned that it is neutral to bullish in the short term, but the long-term implications are strongly positive for Bitcoin. This shift lays a foundational framework for a financial system where Bitcoin’s decentralized scarcity underpins centralized liquidity—illuminating a pathway to institutional-grade acceptance.
Projection estimates suggest that BlackRock’s iShares Bitcoin Trust (IBIT) could see its assets under management soar from $86.8 billion to over $100 billion by November, prompted by this tax-deferred migration of coins from self-custody into regulated funds. While these swaps don’t generate new buying pressure, they increase the ETF’s assets mechanically, narrow the circulating supply through cold-storage strategies, and fortify Bitcoin’s role as a compliant asset for institutional portfolios.
Analysts have indicated that ETF holdings could grow by another 10–15% in the fourth quarter of 2025, even without significant inflows. This dynamic may prompt a supply squeeze, as the current 12 Bitcoin ETFs reportedly hold around 1.35 million coins, accounting for approximately 6.8% of Bitcoin’s total circulating supply. With fewer coins available on exchanges, marginal inflows could create outsized effects on Bitcoin’s price discovery process.
Furthermore, factoring in the Federal Reserve’s ongoing monetary easing—currently maintaining policy rates between 4.00% and 4.25%—this contraction in available Bitcoin supply might amplify price momentum, potentially pushing Bitcoin’s price from around $108,000 towards $140,000 by mid-2026.
