BlackRock and Bitwise slash Bitcoin ETF conversion minimums to $1M and $3M

Wall Street cuts entry barriers for private Bitcoin holders

BlackRock lowered the minimum amount of Bitcoin required to convert private coins into shares of its iShares Bitcoin Trust (IBIT) from $25 million to $1 million. Bitwise made a similar move, dropping its minimum for its Bitcoin ETF from $100 million to $3 million. This shift makes it easier for family offices and wealthy investors to move their self-custodied Bitcoin into regulated funds.

Key numbers in the change

• BlackRock reduced its minimum by 96%, bringing it down to $1 million.
• Bitwise reduced its minimum by 97%, now sitting at $3 million.
• BlackRock has processed more than $5 billion in these conversions since July.
• Morgan Stanley and Galaxy also cut their minimum for referred clients to $5 million, an 80% reduction.

How the in-kind process works

An "in-kind" conversion allows a holder to transfer actual Bitcoin directly into an ETF instead of selling it for cash and buying back in. An authorized participant acts as the middleman, transferring the coins and receiving ETF shares in return. This process avoids the need to sell Bitcoin, which can trigger taxes and execution costs.

The Securities and Exchange Commission (SEC) approved in-kind creations for crypto exchange-traded products in July 2025. Before this rule change, investors generally had to use cash to buy ETF shares.

Why investors are making the switch

BlackRock cited safety concerns as a key driver. The company noted that kidnappings, ransom demands, and custody failures can motivate holders to move coins into an ETF. Data from Chainalysis and CertiK shows an increase in violent crypto incidents and home invasions, making physical possession of Bitcoin a security risk for some.

There are also tax benefits. Selling Bitcoin to buy an ETF can create a taxable event. In-kind conversions may defer those gains, though individual tax advice is still required.

Costs and trade-offs

Moving Bitcoin into an ETF comes with fees. BlackRock charges a 0.25% annual fee, which amounts to $2,500 per year on a $1 million position. Bitwise charges 0.20%, or $6,000 annually on a $3 million position. Investors must weigh these costs against the expense of securing private keys, hiring physical security, and managing inheritance plans for self-custody.

Bitcoin concentration continues

As more coins move into ETFs, they are accumulating with fewer custodians. In April, funds naming Coinbase as a custodian held about 84% of US Bitcoin ETF assets. This trend centralizes the operational control of Bitcoin, even as it spreads the burden of custody away from individual wallets.

US spot Bitcoin ETFs now hold 1,246,336 BTC, representing nearly 6% of the total 21 million Bitcoin supply. IBIT alone holds 765,389 BTC, with net assets of $60.65 billion.

What is confirmed

• BlackRock's IBIT minimum for in-kind conversions is now $1 million.
• Bitwise's BITB minimum is now $3 million.
• More than $5 billion has been processed through BlackRock's program.

What is still unclear

• The exact breakdown of why clients are converting coins—whether due to safety fears, tax planning, or portfolio diversification.
• Individual conversion volumes for Bitwise and other firms.

Why this matters

This change signals that cryptocurrency custody is becoming a standard service rather than a niche offering for ultra-wealthy whales. By lowering the barrier, firms are bridging the gap between self-custody and traditional brokerage accounts, potentially accelerating mainstream adoption.

Sources

• CryptoSlate