Bitcoin News: Bitcoin’s Self-Custody Era Fades as Whales Move $3B Into ETFs Like BlackRock’s IBIT

Key TakeawaysBitcoin’s self-custody share is shrinking as whales move assets into regulated ETFs for tax and compliance benefits.BlackRock’s IBIT has seen over $3 billion in whale conversions, signaling accelerating institutional adoption.A new SEC rule change allows for in-kind ETF redemptions, shielding investors from taxable events.Bitcoin’s Self-Custody Era Fades as Whales Move Into ETFsBitcoin’s original “not your keys, not your coins” ethos is fading as major holders increasingly migrate funds into regulated exchange-traded funds (ETFs).According to Martin Hiesboeck, head of blockchain and crypto research at Uphold, this marks the first meaningful decline in self-custodied BTC in over 15 years.“Another nail in the coffin of the original crypto spirit,” Hiesboeck wrote on X, adding that convenience, tax efficiency, and professional wealth management are now trumping decentralization ideals.He noted that institutional investors — including family offices and early Bitcoin adopters — are finding it more efficient to manage their BTC exposure through ETFs that integrate easily with existing financial systems, lending programs, and compliance frameworks.BlackRock’s IBIT Leads the Institutional ShiftThe biggest beneficiary of this shift has been BlackRock’s iShares Bitcoin Trust (IBIT), which has facilitated more than $3 billion in direct whale conversions, according to Robbie Mitchnick, head of digital assets at BlackRock.Mitchnick told Bloomberg that many long-term Bitcoin holders are choosing ETFs over self-custody wallets due to ease of access, security assurances, and tax-optimized structures.“These investors aren’t leaving Bitcoin — they’re rebalancing how they hold it,” he explained.This trend coincides with broader institutional migration into spot Bitcoin ETFs, with regulated custodians like Coinbase Custody and Fidelity Digital Assets now securing a significant share of total BTC supply.SEC Rule Change Makes ETFs More Tax-EfficientA major driver of this movement is the U.S. SEC’s recent rule adjustment, which allows “in-kind” creations and redemptions for spot Bitcoin ETFs.This structure enables authorized participants to exchange Bitcoin directly for ETF shares — rather than selling assets for cash — thereby avoiding taxable events.Under the previous “cash redemption” model, ETFs had to sell assets to meet redemptions, triggering capital gains passed on to shareholders.In contrast, in-kind transfers preserve the underlying BTC and shield investors from collective tax exposure.“The in-kind mechanism makes ETFs more tax-efficient for long-term holders by reducing the need to sell assets,” Hiesboeck explained.End of an Era: From Self-Custody to InstitutionalizationThe trend underscores a structural transformation in how Bitcoin is held and perceived.Once the centerpiece of crypto’s decentralized philosophy, self-custody is increasingly being replaced by institutional-grade custodial frameworks — a move that critics say risks eroding Bitcoin’s original ethos.Still, proponents argue that greater institutional participation boosts liquidity, regulatory clarity, and mainstream credibility — all critical for Bitcoin’s next phase of adoption.