Some of Bitcoin’s largest holders, colloquially known as whales, are quietly moving billions of dollars worth of coins into spot exchange-traded funds (ETFs).
On October 21, Bloomberg reported that these whales executed approximately $3 billion in in-kind transfers through BlackRock’s iShares Bitcoin Trust (IBIT). Instead of selling, they handed over their Bitcoin to the ETF in exchange for fund shares, a process known as tailoring.
Notably, this migration was made possible by an SEC policy change in July 2025, approving in-kind creations and redemptions for crypto ETFs. The rule allows authorized participants to supply the underlying Bitcoin in lieu of cash, aligning digital asset funds with the practices of commodity ETFs used for gold or oil.
Meanwhile, this move presents a structural shift that could redefine how flagship digital assets function within global markets.
Bloomberg ETF analyst Eric Balchunas described it as a turning point, noting that even longtime crypto purists recognize the benefits of traditional finance.
He said:
“Tradfi (particularly ETFs) is cooler than crypto thinks.”
Why Are Bitcoin Whales Turning to ETFs?
Nicolai Søndergaard, a research analyst at Nansen, told us CryptoSlate that the ETF creations allow whales to defer taxes by exchanging Bitcoin for fund shares.
According to him, this helps these cohorts maintain their exposure to BTC without selling. He also noted that the actions are “bullish because it takes Bitcoin out of circulation.”
However, he pointed out that the “disadvantage is that you cannot trade 24/7 and you have to stick to normal trading hours, but it is likely that these whales are not active traders anyway.”
Meanwhile, analysts from Bitunix said CryptoSlate that Bitcoin whales engage in these wallet transactions because this step converts their decentralized wealth into assets recognized by the traditional financial world.
According to them:
“This marks a deeper phase of institutional integration for crypto markets. Bitcoin is moving from an anti-establishment symbol to 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 warned that this evolution comes with a trade-off. As more Bitcoin becomes locked into ETFs, the market could split into two distinct tiers: “regulated Bitcoin,” which functions as a financialized, collateral-bearing asset, and “on-chain Bitcoin,” which retains its decentralized, autonomous roots.
Crypto analyst Shanak Anslem Perera echoed Supporting this view, it argues that Bitcoin held by the ETF can now be treated as marginal collateral, eligible for repos and borrowed at rates of around 4 to 6%, while reserves remain cryptographically verifiable.
Perera explained that this evolution transforms Bitcoin from a volatile trading instrument to a functional financial infrastructure that can support lending and leveraged portfolios.
He claimed:
‘This is not ‘adoption’. It is a monetary architecture that rewrites itself in real time: decentralized scarcity, reprogramming of centralized liquidity.”
Furthermore, Wes Gray, the founder of Alpha Architect, suggested that the whales may have taken these actions to protect themselves from attackers. He said:
“[It is] also fun to avoid the crazy guy with a gun who comes to your house and demands you transfer 10 BTC or it’s game over.
Notably, the crypto industry has seen an increase in wrench attacks targeting crypto holders after BTC rose to a new all-time high this year.
What impact will this have on Bitcoin?
Analysts at Bitfinex report this CryptoSlate that the growing wave of in-kind ETF creations is neutral to bullish in the short term, but structurally bullish in the long term.
They explained that this trend lays the foundation for a financial system in which Bitcoin’s decentralized scarcity supports centralized liquidity.
Taking this into account, they predicted that BlackRock’s iShares Bitcoin Trust (Ibit) could see its assets under management (AUM) rise from $86.8 billion to over $100 billion in November, as tax-deferred conversions continue to absorb self-managed coins into regulated funds.
While these swaps do not create new buying pressure, they mechanically expand the ETF AUM, reduce circulating supply through cold storage, and strengthen Bitcoin’s role as institutional-grade collateral.
Bitfinex added that ETF holdings could grow another 10-15% in the fourth quarter even without significant net inflows.
They noted that this dynamic could create a mechanical supply crisis, as the 12 BTC ETFs now own approximately 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 formation.
Combined with continued monetary easing by the Federal Reserve (policy rates currently between 4.00% and 4.25%), this contraction in available supply could strengthen upside momentum, potentially pushing Bitcoin’s price from around $108,000 today to around $140,000 by mid-2026.
