BlackRock has cut the minimum threshold for converting Bitcoin into shares of its IBIT spot ETF by 96 %, lowering it from $25 million to $1 million. Effective since July, the move makes the process about 25 times more accessible, opening a frictionless bridge between self-custody and Wall Street as more than $5 billion has already flowed through the mechanism.
🔑 Key takeaways
- BlackRock slashed IBIT’s in-kind creation threshold from $25M to $1M, a 96 % cut.
- Bitwise cut BITB from $100M to $3M (-97 %), opening the door to a far broader investor base.
- Over $5 billion in Bitcoin has already been converted into IBIT shares via the mechanism.
- The SEC approved in-kind creations and redemptions for crypto ETPs in July 2025.
- IBIT holds 765,389 BTC, or 3.645 % of the maximum supply, with $60.65B in net assets.
In-kind creation: a direct bridge between personal wallets and Wall Street
In-kind creation lets a Bitcoin holder transfer crypto directly to an authorized participant, which then issues ETF shares in exchange. The process skips the traditional sequence of selling Bitcoin, wiring dollars, and buying back into the fund, preserving exposure to the underlying price throughout.
Tax treatment remains central. As BlackRock’s head of digital assets Robbie Mitchnick explained, holders keep their price exposure while potentially avoiding an immediate taxable event, although each situation is individual and warrants personalized advice. According to Bitwise CIO Matt Hougan, transactions that used to be slow now look like an « assembly line » and could ultimately become a one-click operation.
« This will keep growing because we are expanding access. People see what is happening in the outside world — kidnappings, ransom demands, custody failures — and that motivates them to make this move for some or all of their holdings. »
Robbie Mitchnick, Head of Digital Assets, BlackRock
Threshold race: Bitwise, Morgan Stanley and Grayscale follow suit
BlackRock is far from alone. Bitwise delivered an even sharper reduction on BITB, cutting the threshold from $100 million to $3 million, a 97 % drop. The joint Morgan Stanley-Galaxy referral program, announced in June, follows the same logic: Galaxy trimmed its minimum from $25M to $5M for referred clients and accelerated onboarding by up to 75 %, shrinking a process that once took more than four weeks.
In-kind conversions already represent 5 to 7 % of assets in Morgan Stanley’s MSBT fund, which totals roughly $560 million. At 21Shares, the average transaction size over the past three months was $5 million. At Grayscale, the share of gross Bitcoin creations executed in kind climbed from 28 % in March to 62 % in June. For Ethereum products, the proportion rose from 57 % to 63 % over the same window.
« Today this native crypto use case is fully in motion. We are also seeing more and more ETF market makers adopt the in-kind functionality as they revert to the original, and often more efficient, way of running ETPs. »
Krista Lynch, Head of Trading and Capital Markets, Grayscale
| Issuer / Fund | Old threshold | New threshold | Reduction |
|---|---|---|---|
| BlackRock (IBIT) | $25M | $1M | -96 % |
| Bitwise (BITB) | $100M | $3M | -97 % |
| Galaxy (MS clients) | $25M | $5M | -80 % |
Resurgent demand: IBIT captures 71 % of inflows
The threshold cuts land amid a sharp rebound in ETF demand. Farside data show US spot Bitcoin ETFs absorbed $2.57 billion across seven positive sessions from August 17 to 25, of which $1.82 billion went to IBIT — 71 % of the total. Bitcoin traded above $79,000 during the stretch. Combined Bitcoin and Ethereum ETFs pulled in $2.62 billion over the week, with record weekly inflows of $1.92 billion for 2026.
Holding figures underline the concentration. According to Arcane Research cited by CryptoSlate, US spot ETFs held 1,246,336 BTC on August 25, equal to 5.935 % of the 21 million maximum supply. IBIT alone holds 765,389.9 BTC for $60.65 billion in net assets. Funds using Coinbase as primary custodian account for 84.1 % of US Bitcoin ETF assets on a broad basis — around $74.06 billion.
Security, fees and custody trade-offs
The security backdrop is fueling the migration. Chainalysis documented 46 violent incidents tied to crypto through end-June, with more than $30 million stolen in H1 2026 — already over half the full-year record of $58M set in 2025. Only 12 of 46 attempts ended in payment. CertiK logged 52 verified incidents over the same period, up 33.3 % year-on-year, with $124.1 million in exposure. Home invasions jumped from 1 to 20 incidents year-on-year, while kidnappings rose from 12 to 16.
But the custody concentration carries costs. IBIT charges annual fees of 0.25 %, and ETF shareholders hold a claim on the fund rather than the underlying coins, which sit with custodians. IBIT documents list Anchorage as an additional custodian option, ARK names Coinbase alongside BitGo and Anchorage, Fidelity relies on its in-house digital assets subsidiary, and VanEck leans on Gemini. As Bloomberg Intelligence analyst Eric Balchunas put it, the ETF is an « interim solution » for investors who do not want to self-custody.
Outlook: toward a generalized on-chain migration
The widening of in-kind creation thresholds marks the entry into a new phase: an operational, fluid and tax-optimized bridge between self-custody and traditional exchanges. The mechanism is already extending to Ethereum at Grayscale and VanEck, and to Solana at Bitwise, suggesting a progressive standardization across the crypto ETP landscape. As thresholds fall, the arbitrage becomes viable for family offices, wealth managers and third-party custody platforms, which could accelerate the migration Pantera Capital has dubbed « the great onchain migration. »
Key catalysts to watch include the pace of in-kind adoption by ETF market makers, the evolution of Coinbase’s share of ETF custody, and the response from other jurisdictions — notably Europe under MiCA — which could see the same flows redirected. The base case remains a steady but regular adoption, with systemic concentration risk around a single custodian if diversification fails to keep pace.
Sources
- CryptoSlate — It just got 25 times easier to move self-custody Bitcoin directly onto Wall Street
- NetDania / Buzz FX — CryptoSlate analysis repost
- Incrypted — BlackRock lowered threshold for swapping Bitcoin into its ETF by 25 times
- Pantera Capital — The Great Onchain Migration
- Federal Register — US Stablecoins Act implementing rules
- Binance Square — community discussion and repost
This article is for informational and educational purposes only. It does not constitute investment advice. Do your own research (DYOR) before making any decision.
