Some of Bitcoin’s biggest holders, commonly known as whales, have secretly moved billions of dollars worth of coins into spot exchange-traded funds (ETFs).
On October 21, Bloomberg reported that these whales had executed approximately $3 billion in in-kind transfers through BlackRock’s iShares Bitcoin Trust (IBIT). Instead of selling, they gave their Bitcoin to the ETF in exchange for fund shares. This is a process known as custom creation.
Notably, this transition was made possible by a July 2025 SEC policy change authorizing the in-kind creation and redemption of crypto ETFs. The rules allow authorized participants to hand over the underlying bitcoin rather than cash, aligning digital asset funds with the practices of commodity ETFs used for gold and oil.
Meanwhile, the move signals a structural shift that could redefine how flagship digital assets function within global markets.
Bloomberg ETF analyst Eric Balciunas described this as a turning point, noting that even longtime crypto purists are recognizing the benefits of traditional finance.
he said:
“Tradfi (especially ETFs) is worse than cryptocurrencies think.”
Why are Bitcoin whales turning to ETFs?
Nicolai Søndergaard, Research Analyst at Customs Nansen crypto slate The creation of the ETF will allow whales to defer taxes by exchanging the fund’s shares for Bitcoin.
According to him, this will help these cohorts maintain their BTC exposure without selling. He also pointed out that the move is “bullish because it will remove Bitcoin from circulation.”
However, he said, “The downside is that you can’t trade 24/7 and you have to adhere to normal trading hours, but in any case these whales are likely not active traders.”
Meanwhile, Bitunics analysts said: crypto slate Bitcoin whales engage in these portfolio trades because this move transforms their decentralized assets into assets recognized in traditional finance.
According to them:
“This signals a deeper stage of institutional consolidation in the crypto market. Bitcoin is evolving from a symbol of opposition to a regulated asset class, and its capital efficiency and legitimacy are being redefined.”
For institutional investors, the ETF structure allows for leverage, compliance, and formal inclusion in multi-asset portfolios, making Bitcoin a viable liquidity element alongside bonds and stocks. ”
However, they caution that this evolution comes with tradeoffs. As more Bitcoin becomes locked up in ETFs, the market could split into two distinct tiers: regulated Bitcoin, which acts as a financialized collateralized asset, and on-chain Bitcoin, which maintains its decentralized and autonomous roots.
Cryptocurrency analyst Shanak Anslem Perera echoed this view, arguing that the ETF’s Bitcoin holdings are now treated as margin collateral, are repo eligible, reserves remain cryptographically verifiable, and can be borrowed at interest rates of around 4-6%.
Perera explained that this evolution has transformed Bitcoin from a volatile transaction vehicle to a functional financial infrastructure that can support lending and leveraged portfolios.
He claimed:
“This is not an ‘adoption’; it is a financial architecture that rewrites itself in real time, reprogramming decentralized scarcity to enable centralized liquidity.”
Furthermore, Alpha Architect founder Wes Gray suggested that the whales may have taken this action to protect themselves from attackers. he said:
“It’s also good to avoid the gun-wielding weirdo who shows up at your house and demands you transfer 10 bits or it’s game over.”
Notably, with BTC hitting a new all-time high this year, the crypto industry has seen an increase in wrench attacks targeting crypto holders.
How will this affect Bitcoin?
Analysts at Bitfinex said: crypto slate The growing wave of physical ETF creation is neutral or bullish in the short term, but structurally bullish in the long term.
They explained that this trend lays the foundation for a financial system where Bitcoin’s decentralized scarcity supports centralized liquidity.
With this in mind, they predicted that BlackRock’s iShares Bitcoin Trust (IBIT) assets under management (AUM) could grow from $86.8 billion to more than $100 billion by November as tax-deferred conversions continue to absorb coins from self-custody into regulated funds.
While these swaps do not create new buying pressure, they mechanically expand the ETF’s assets under management, strengthen circulating supply through cold storage, and strengthen Bitcoin’s role as institutional-grade collateral.
Bitfinex added that even without significant net inflows, ETF holdings could grow another 10-15% in the fourth quarter.
They noted that this dynamic could cause a mechanical supply squeeze, as 12 BTC ETFs currently hold approximately 1.35 million coins (or 6.8% of Bitcoin’s circulating supply). With fewer coins available on exchanges, small inflows can have a huge impact on price discovery.
Coupled with the Fed’s continued monetary easing (policy rates currently range from 4.00% to 4.25%), this reduction in available supply could amplify upward momentum, pushing Bitcoin’s price from around $108,000 now to around $140,000 by mid-2026.
(Tag translation) Bitcoin
