Bitcoin Whales Flock to Wall Street ETFs via In-Kind Creation Processes

Some of Bitcoin's largest holders are moving their crypto wealth into Wall Street exchange-traded funds, allowing them to retain exposure to Bitcoin while shifting from private wallets and crypto platforms to mainstream finance.

This trend is being driven by the increasing availability of in-kind creation processes, which enable investors to swap large cryptocurrency holdings for ETF shares without selling their assets first. The process was initially only available to high-net-worth individuals but has become more routine with the reduction of minimum transaction sizes.

BlackRock Inc. cut its minimum size for such transactions to $1 million in July from $25 million, and since US regulators permitted in-kind creations last summer, more digital assets have been moving into funds this way. The market infrastructure has also expanded steadily.

The shift can help investors simplify their holdings, reducing the burden of private keys, digital wallets, and self-custody while gaining some protections from conventional financial products. This change can be accomplished without immediately triggering a capital-gains tax bill, depending on the investor's circumstances.

Robbie Mitchnick, head of digital assets at BlackRock, said that transactions using in-kind creation processes have become 'more like a conveyor belt' and are expected to become even more streamlined in the future. The process has already facilitated over $5 billion in conversions through BlackRock's IBIT fund.