Large Bitcoin holders are beginning to shift their assets into exchange-traded funds (ETFs), using a method known as in-kind transfers. The process allows them to convert Bitcoin directly into ETF shares without selling the asset or triggering a taxable event. According to Bloomberg, BlackRock has already facilitated over $3 billion in these conversions.
The move comes after a regulatory change in July that approved in-kind transactions for Bitcoin ETFs. These transfers are widely used across other ETF types and are now being adopted for digital assets.
Bitcoin Moves Into the Traditional System
In-kind transfers allow investors to maintain exposure to Bitcoin while holding it in a format recognized by financial platforms. The converted holdings can sit inside brokerage accounts, be pledged as collateral, or included in estate plans. BlackRock’s Robbie Mitchnick said clients are seeing value in holding their Bitcoin “within their existing financial adviser or private-bank relationship.”
Firms such as Bitwise and Galaxy have also begun offering this option. Inquiries from investors have increased, according to Bitwise, with interest coming from those seeking better integration with existing wealth management tools.
Partial and Full Conversions Underway
Some holders are choosing to move a portion of their Bitcoin into ETFs. Others are going all in. “There is a subset who are just going 100/zero,” said Mitchnick, referring to those shifting all of their assets into the traditional financial system.
Bitwise President Teddy Fusaro explained that visibility of assets plays a role in service levels. He described a case where a client held $5 million in Bitcoin off-platform, saying, “If you bring your $5 million worth of Bitcoin into a Bitcoin ETF... you qualify for a much higher level of service.”
Bitcoin’s Evolving Relationship With Finance
Although Bitcoin was created as an alternative to centralized finance, more of its long-term holders are now embracing the structure of traditional markets. ETFs offer easier access to credit, reporting, and long-term planning.
Wes Gray, CEO of ETF firm Alpha Architect, commented on the shift. “Life is just easier in TradFi land,” he said, noting that Bitcoin users are now seeing the advantages of established systems over private wallet storage.