BlackRock and Bitwise slash Bitcoin ETF conversion thresholds, processing $5 billion in self-custody moves

BlackRock reduced the minimum threshold for converting privately held Bitcoin into IBIT shares from $25 million to $1 million, while Bitwise lowered its floor from $100 million to $3 million. This shift signals that custody has evolved from a marketing slogan into a practical service for Wall Street, reaching beyond the wealthiest institutional users.

In July, BlackRock announced the 96% reduction in the minimum transaction size for qualifying Bitcoin holders to convert coins directly into shares of its iShares Bitcoin Trust ETF, according to Bloomberg. This change makes the service accessible to a broader range of family offices and wealthy clients. The company reported that the program has already processed more than $5 billion.

Bitwise implemented an even more significant reduction, dropping its minimum from $100 million for its first transaction to $50 million, and finally to $3 million. This 97% cut allows conversions that preserve Bitcoin price exposure while placing the coins within the fund’s custody structure.

This lower entry point addresses previous concerns regarding execution costs and potential tax liabilities associated with selling coins, wiring dollars, and repurchasing exposure through an ETF. In-kind conversion consolidates these steps into a single institutional transaction, providing holders with ETF shares that integrate into standard brokerage accounts.

Although a $1 million floor still excludes most investors, it significantly expands the pool beyond those capable of committing $25 million or $100 million in a single transaction. This threshold transforms self-custody from a permanent status into a service choice with measurable costs compared to institutional alternatives.

Provider and product	Published conversion size	Reduction	One-time conversion charge	Annual ETF fee	Estimated annual fee at cited size	Evidence of use
BlackRock IBIT	$1 million minimum, down from $25 million	96%	Undisclosed to the end client	0.25%	$2,500 on $1 million	More than $5 billion processed
Bitwise BITB	$3 million minimum, down from $100 million through an interim $50 million floor	97%	Undisclosed to the end client	0.20%	$6,000 on $3 million	Aggregate conversion volume undisclosed
Morgan Stanley and Galaxy	$5 million lending minimum for referred clients, down from $25 million	80%	Undisclosed and dependent on the client arrangement	Varies by chosen ETP; MSBT charges 0.14%	$7,000 on $5 million if converted into MSBT	Onboarding can be shortened by as much as 75%
Grayscale GBTC or BTC	No minimum published	N/A	Undisclosed to the end client	1.50% for GBTC; 0.15% for BTC	$15,000 or $1,500 per $1 million	In-kind transactions represented 62% of gross Bitcoin creations in June, versus 28% in March
ARK 21Shares ARKB	No minimum published; completed transactions averaged about $5 million	N/A	Undisclosed to the end client	0.21%	About $10,500 on a $5 million position	Average completed transaction was about $5 million over three months

A whale service becomes a wealth-management product

In-kind creation is an institutional process available to authorized participants and eligible clients. A holder transfers Bitcoin through an authorized participant, the trust issues ETF shares at settlement, and the intermediary credits those shares to the holder’s account. Regular brokerage clients continue to buy and sell IBIT shares for cash.

The SEC approved in-kind creations and redemptions for crypto exchange-traded products (ETPs) in July 2025, ending the original cash-only restriction that CryptoSlate analyzed regarding its effects on spreads, taxes, and flows.

IBIT’s operating documents permit an authorized participant or its client to deposit Bitcoin into the trust’s trading account for a creation order, with the trust issuing shares to the authorized participant at settlement.

This route reduces friction for wealthy holders who already own BTC. Selling Bitcoin, wiring dollars, and repurchasing exposure through an ETF incurs execution costs and may trigger taxable gains, whereas in-kind transactions may defer those gains for some holders. Since tax outcomes vary by holder and legal structure, each conversion requires individual tax advice.

What was once a bespoke transaction is becoming a repeatable service. A Morgan Stanley and Galaxy referral program announced in June illustrates this spread into wealth management. Under this arrangement, an eligible client lends crypto to Galaxy, which coordinates an in-kind creation with an authorized participant before ETF shares are delivered to the client’s chosen account. Galaxy reduced its minimum for referred clients from $25 million to $5 million and stated that onboarding, which previously exceeded four weeks, can now be shortened by up to 75%.

Activity across the industry reflects this normalization. Grayscale completed 62% of its gross Bitcoin creations in-kind in June, up from 28% in March. Completed transactions at 21Shares averaged approximately $5 million over the three months through July, according to Bloomberg.

US spot ETFs already hold a substantial portion of Bitcoin’s total supply. Data from Bitbo on August 25 counted 1,246,336 BTC across 13 funds, representing 5.935% of the 21 million supply. IBIT alone held 765,389.9 BTC, or 3.645% of the supply, with BlackRock listing its net assets at $60.65 billion on the same date.

Self-custody now carries a physical price

Robbie Mitchnick, BlackRock’s head of digital assets, told Bloomberg that kidnappings, ransom demands, and custody failures can motivate holders to move some or all of their coins into an ETF. The company has not broken down the $5 billion by motive, so crime data provides context for the environment surrounding conversions but does not establish their direct cause.

The physical threat has become easier to quantify. Chainalysis documented 46 violent crypto incidents through late June and estimated that attackers successfully stole more than $30 million during the first half of 2026. This total exceeded half of the record $58 million stolen in 2025, with only 12 of the 46 attempts resulting in a payment.

CertiK recorded 52 verified incidents during the first half of the year, a 33.3% increase from the previous year, with $124.1 million in recorded exposure. This broader figure includes losses and ransom demands, making it distinct from Chainalysis’s stolen-funds estimate. CertiK also noted that home invasions rose from one to 20 incidents year-over-year, while kidnappings increased from 12 to 16.

Self-custody removes an exchange or bank from the authorization chain, leaving the holder as the final signer. While a properly secured wallet can resist remote theft, a criminal inside the home can target the individual who knows the location of the seed phrase, hardware device, or second multisig signer.

The true cost of self-custody extends beyond the hardware wallet. Multisig coordination, inheritance planning, private security, reporting, and recovery all consume money or attention. This burden expands when family members become targets, which is why BlackRock describes IBIT as a method to simplify the operating and custody complexity of direct ownership.

However, IBIT’s 0.25% annual sponsor fee and its reliance on brokerage and market infrastructure impose their own costs. The owner holds a security whose value tracks Bitcoin while the fund’s custodians retain the coins. Direct custody preserves the ability to withdraw, transfer on-chain, and verify assets in a personal wallet.

Safer Bitcoin owners can feed a concentrated system

Moving coins into an ETF can reduce an individual’s exposure to key loss and physical coercion while placing more Bitcoin within a smaller set of institutional firms. CryptoSlate calculated in April that funds naming Coinbase as a custodian or primary custodian represented 84.1% of US Bitcoin ETF assets under a broad method. A stricter count excluding multi-custodian funds with undisclosed allocations still reached 80.8%, or approximately $74.06 billion.

These percentages describe funds connected to Coinbase in some custody capacity and leave the exact allocation of coins among providers undisclosed. The stricter estimate captures a structural trade: thousands of people can reduce individual key risk by moving into products whose operating dependencies converge in a handful of companies.

The custody map can spread across more companies. BlackRock’s documents name Anchorage as an available additional custodian, ARK has listed Coinbase alongside BitGo and Anchorage, Fidelity uses its own digital-asset subsidiary, and VanEck uses Gemini. The market can therefore move more coins into institutional custody while distributing them among more providers.

The conversion program is expanding alongside a fresh burst of demand for ETFs. Data from Farside shows that US spot Bitcoin ETFs absorbed $2.57 billion across seven positive sessions from August 17 through August 25. IBIT captured $1.82 billion, or 71% of the total. CryptoSlate covered the first six sessions as a rebound in ETF demand, while the seventh added another $314.3 million across the category.

Daily net inflows and direct Bitcoin conversions measure different activities, so their totals belong in separate datasets and are not directly comparable. However, this demonstrates two routes operating simultaneously: investors are sending fresh capital into ETF shares while existing coin holders gain a cheaper way to place Bitcoin they already own inside the same funds.

Bitcoin still allows holders to control an asset that can move anywhere the network reaches. Wealthy owners can continue paying for the security, coordination, and recovery systems that direct control requires. Wall Street now sells Bitcoin price exposure in a conventional account and assumes much of that operational burden for qualifying clients.

The protocol’s self-custody option remains available as the fund industry cuts the entry price for its package by 96% at BlackRock and 97% at Bitwise. More than $5 billion has already passed through IBIT, demonstrating how institutional adoption can advance through coins leaving private wallets alongside dollars arriving from buyers who never held Bitcoin.

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