BlackRock says security fears are pushing bitcoin whales into IBIT

What happened

BlackRock's head of digital assets, Robbie Mitchnick, said large bitcoin holders are moving coins they custody themselves into shares of the iShares Bitcoin Trust at an unprecedented rate, Barron's reported. He described demand for the conversions as the strongest the firm has seen and said it has moved in only one direction: higher. Among the reasons clients give, he said, security and peace of mind stand out.

The transactions are in-kind conversions. An investor sends bitcoin to the fund through an intermediary and receives newly created IBIT shares, without first selling the coins for cash. BlackRock relies on Galaxy Digital, Talos and Virtu to arrange the trades, and those firms determine the minimum size. Barron's reported about $3.6 billion of such activity, while noting the true total could be higher because BlackRock does not process every conversion itself.

Mitchnick has cited a larger figure before. In August, he told Bloomberg that IBIT had handled more than $5 billion of in-kind swaps, up from more than $3 billion in October 2025. He has pointed to events outside crypto custody, including kidnappings, ransom demands and custody failures, as catalysts. He also said the recent Binance hack was not a surprise to big holders, who already understood the risks of keeping coins on an exchange or in a hot wallet.

Why it matters

The trend runs against bitcoin's original appeal: holding money without relying on a bank or intermediary. A holder who converts gives up private keys and accepts a brokerage claim backed by BlackRock, its custodian and the market makers involved. That trade-off is central to the pitch. Mitchnick has argued that holding exposure inside a private bank is much simpler for estate planning, and Barron's noted that in-kind conversions are generally not viewed as a sale that triggers capital-gains taxes, though Bloomberg cautioned that the outcome depends on an investor's circumstances.

Access has widened. The minimum has fallen from about $30 million to roughly $1 million to $2 million, Barron's reported, opening the service to a broader group of wealthy holders. Crypto.news noted that the conversion demand is arriving while ETF shares are being redeemed, a contrast that reflects different activities rather than a contradiction.

What the data shows

The conversion figures sit alongside heavy outflows from bitcoin funds. U.S. spot bitcoin ETFs lost about $1.28 billion in the week ended Nov. 6, their worst week since June, and IBIT accounted for about $1.21 billion of that, according to Farside Investors data cited by Crypto.news and 99Bitcoins. On Nov. 9, IBIT recorded $213.2 million in net outflows, its seventh straight session of withdrawals, and has lost about $1.66 billion since Oct. 30. U.S. spot bitcoin ETFs saw $201 million in net outflows that day, while Morgan Stanley's MSBT took in $22.1 million.

Conversions and daily flows measure different things. An in-kind creation adds IBIT shares and counts toward reported flows, but no bitcoin is bought on the open market; existing coins change wrappers. That means headline flow numbers can overstate new cash entering the fund. The reported conversion total may also be incomplete because BlackRock does not handle every transaction through its intermediaries.

Background

The structure became possible after the SEC voted on July 29, 2025, to allow spot bitcoin and ether funds to create and redeem shares in kind. Before that decision, the funds launched in January 2024 used cash-only creations and redemptions. SEC Chairman Paul Atkins said the change would make the products less costly and more efficient, according to Crypto.news. Grayscale later expanded in-kind contributions across ten digital-asset products, including bitcoin, ether, solana and XRP.

IBIT's bitcoin is held by a custodian that is an affiliate of Coinbase Prime, in what Mitchnick has called an institutional-grade cold-storage model. The fund held 795,921 BTC, worth about $60.4 billion, as of Nov. 6. The security concerns behind the conversions are not abstract. French authorities have recorded 77 crypto-linked kidnappings, extortion cases and home invasions in 2026, more than in all of 2025, according to the OCCRP. Reuters reported last year that Ledger's co-founder lost a finger after being kidnapped with his wife, and the U.S. has seen cases including a failed Connecticut plot to force a family to hand over bitcoin. Researcher Jameson Lopp keeps a public list of physical attacks on holders dating to 2014, and a Coldcard bug in August raised questions about hardware wallets.

What to watch

The coming months will show whether the conversion trend persists alongside ETF redemptions and whether lower minimums bring in more holders. Also worth watching: how regulators and tax authorities treat in-kind transfers, whether security incidents continue to push large holders toward fund wrappers, and whether competing issuers expand similar services. BlackRock's own disclosures and Farside flow data will provide the clearest read on whether the shift is broadening or remains concentrated among the largest holders.

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