For the first time in roughly 15 years, the amount of Bitcoin held in self-custody wallets has actually declined. The culprit isn’t a hack or a mass sell-off. It’s a tax-efficient on-ramp that Wall Street built specifically for whales who want to keep their Bitcoin exposure without the headaches of holding their own keys.
BlackRock’s iShares Bitcoin Trust (IBIT) has facilitated over $3 billion in Bitcoin deposits through in-kind creation mechanisms by late 2025, according to Bloomberg. Instead of selling their Bitcoin for cash, triggering a taxable event, and then buying ETF shares, large holders can now swap their actual coins directly for IBIT shares. Same economic exposure, zero tax bill on the transfer.
How the in-kind swap works
The in-kind creation process lets authorized participants deliver Bitcoin directly to the ETF’s custodian in exchange for newly created fund shares. The holder’s position doesn’t change in economic terms. They still have the same dollar value of Bitcoin exposure. But the legal wrapper around that exposure shifts from a personal wallet to a regulated fund structure.
Bloomberg reported that these in-kind mechanisms became operationally smoother and more cost-effective for large transfers in 2026. For a whale sitting on tens of thousands of Bitcoin accumulated over the past decade, the friction of converting to an ETF position has dropped dramatically.
