Bitcoin Whales Shift $3B in BTC to BlackRock’s IBIT ETF Amid Supply Squeeze
Introduction
In a landmark shift for cryptocurrency markets, Bitcoin’s largest holders—popularly known as “whales”—have moved approximately $3 billion worth of Bitcoin into BlackRock’s iShares Bitcoin Trust (IBIT) via in-kind transfers. This strategic maneuver, reported by Bloomberg on Oct. 21, allows whales to exchange their Bitcoin directly for ETF shares without selling, leveraging a July 2025 SEC policy change that approved in-kind creations and redemptions for crypto ETFs. The move signals a deepening integration of Bitcoin into traditional finance (TradFi) and highlights structural changes that could redefine Bitcoin’s role in global markets. Analysts describe the trend as a turning point, with implications for Bitcoin’s scarcity, regulatory recognition, and long-term price dynamics.
The Mechanics of In-Kind Transfers and Custom Creations
The $3 billion transfer to BlackRock’s IBIT was executed through custom creation, a process where authorized participants deliver the underlying asset—in this case, Bitcoin—to the ETF in exchange for fund shares. This method aligns digital-asset ETFs with established commodity ETF practices, such as those for gold or oil.
The July 2025 SEC policy change enabled this shift by permitting in-kind creations and redemptions, eliminating the need for cash settlements. By swapping Bitcoin for ETF shares, whales retain exposure to the asset while moving it into a regulated, institutional framework. Eric Balchunas, a Bloomberg ETF analyst, noted that this development underscores the advantages of traditional finance, even for long-time crypto purists.
Why Are Bitcoin Whales Turning to ETFs?
Tax Deferral and Portfolio Management
Nicolai Søndergaard, a research analyst at Nansen, explained that in-kind transfers allow whales to defer taxes by avoiding outright sales. This strategy helps preserve Bitcoin exposure while reducing circulating supply—a bullish signal for the market. Søndergaard added that while ETF shares trade only during market hours, this limitation is unlikely to affect whales who are not active traders.
Institutional Integration and Financial Legitimacy
Analysts at Bitunix emphasized that migrating Bitcoin to ETFs transforms decentralized wealth into assets recognized by traditional finance. They described the trend as a “deeper phase of institutional integration,” where Bitcoin evolves from an “anti-establishment symbol into a regulated asset class.” This shift enhances capital efficiency, compliance, and inclusion in multi-asset portfolios alongside bonds and equities.
Security and Protection
Wes Gray, founder of Alpha Architect, suggested that whales may also be motivated by security concerns. As wrench attacks targeting crypto holders have increased amid Bitcoin’s price surge, storing assets in regulated ETFs reduces physical risks associated with self-custody.
The Two-Tiered Bitcoin Market: Regulated vs. On-Chain
Bitunix analysts cautioned that the migration to ETFs could split Bitcoin into two distinct layers:
- Regulated Bitcoin: Held within ETFs, this portion functions as a financialized, collateral-bearing asset.
- On-Chain Bitcoin: Retains its decentralized, autonomous roots.
Crypto analyst Shanak Anslem Perera expanded on this idea, noting that ETF-held Bitcoin can serve as marginable collateral, repo-eligible assets, or borrowable reserves at rates of 4–6%. He argued that this transformation turns Bitcoin into “functional financial infrastructure” capable of supporting lending and leveraged portfolios. Perera described the shift as “monetary architecture rewriting itself in real time.”
Short-Term and Long-Term Market Impact
Supply Squeeze and Price Dynamics
Analysts at Bitfinex described the trend as “neutral to bullish” in the short term but “structurally bullish” over the long run. By moving Bitcoin into cold storage via ETFs, whales reduce circulating supply, potentially amplifying the impact of marginal inflows on price discovery. Bitfinex projected that IBIT’s assets under management (AUM) could grow from $86.8 billion to over $100 billion by November as tax-deferred conversions continue.
ETF Holdings and Circulating Supply
The 12 U.S. Bitcoin ETFs now hold approximately 1.35 million coins, or 6.8% of Bitcoin’s circulating supply. Bitfinex estimated that ETF holdings could expand by 10–15% in Q4 2025 even without significant net inflows. Coupled with the Federal Reserve’s monetary easing (policy rates between 4.00% and 4.25%), this supply contraction could drive Bitcoin’s price from around $108,000 to $140,000 by mid-2026.
Broader Implications for Crypto and Traditional Finance
The migration of whales to ETFs reflects a broader convergence of decentralized and traditional finance. By embracing regulated vehicles, institutional players gain access to leverage, compliance frameworks, and portfolio integration—advantages that were previously limited to traditional assets. However, this evolution also raises questions about Bitcoin’s original ethos as a decentralized alternative to fiat systems.
As Eric Balchunas observed, “Tradfi (ETFs in particular) is more badass than crypto thinks.” The data suggests that even staunch crypto advocates are recognizing the practical benefits of institutional pathways.
Conclusion: What to Watch Next
The $3 billion transfer to BlackRock’s IBIT marks a pivotal moment in Bitcoin’s maturation as an asset class. Key developments to monitor include:
- ETF AUM Growth: Track whether IBIT and other ETFs continue absorbing Bitcoin from self-custody wallets.
- Regulatory Developments: Watch for further SEC rulings that could expand or restrict in-kind transfers.
- Market Structure Shifts: Observe how the division between regulated and on-chain Bitcoin influences liquidity, volatility, and institutional participation.
While the short-term effects may be subtle, the long-term implications are profound: Bitcoin is transitioning from a speculative digital asset into a cornerstone of modern financial infrastructure. For investors and analysts, understanding this structural shift will be critical to navigating the next phase of crypto markets.