Whales Flock to Regulated Funds, Ditching Self-Custody for Tax Efficiency
The trend of Bitcoin holders keeping their coins in personal wallets has been broken. According to recent data, for the first time in about 15 years, there's a decline in Bitcoin held outside exchanges and funds. This shift isn't due to a hack, crash, or panic selling but rather Wall Street building a tax-friendly door for wealthy holders to use.
The driving force behind this change is BlackRock's iShares Bitcoin Trust, which has absorbed more than $3 billion in Bitcoin through its in-kind ETF creation mechanism by late 2025. This process allows large holders to swap their coins directly for ETF shares without triggering a capital gains tax bill.
Self-custody still dominates Bitcoin holdings, with around 65.9% of the total supply held in non-custodial wallets as of August 2026. However, this shift towards regulated fund structures could continue as the in-kind ETF creation process becomes standard practice on Wall Street.