Large Bitcoin holders are increasingly exchanging their self-custodied coins for shares of BlackRock’s iShares Bitcoin Trust (IBIT), amid heightened concerns over security risks such as hacks and kidnappings, according to BlackRock’s head of digital assets, Robbie Mitchnick.
Growing demand for IBIT amid security threats
Mitchnick stated that the current demand for these swaps is at record levels, with investors primarily motivated by security and peace of mind. These in-kind conversions enable investors to deliver Bitcoin to the fund via an intermediary in exchange for newly created IBIT shares, without having to sell their coins for cash.
BlackRock utilizes intermediaries including Galaxy Digital, Talos, and Virtu to manage the transactions, each of which establishes its own minimum trade size.
In August, Mitchnick reported that IBIT had handled more than $5 billion in such conversions, up from over $3 billion reported in October 2025. Barron’s recently estimated that BlackRock saw $3.6 billion in conversion volume, though the true number may be higher since not all swaps pass directly through BlackRock.
Mitchnick highlighted that clients are increasingly concerned about incidents such as kidnappings, ransom events, and custody failures, prompting a shift towards IBIT for at least part of their Bitcoin holdings.
He also noted that recent high-profile hacks, such as the Binance breach, have reinforced concerns about holding substantial Bitcoin balances on exchanges or in hot wallets.
Mini dictionary: IBIT (iShares Bitcoin Trust) is a spot Bitcoin exchange-traded fund (ETF) managed by BlackRock, allowing investors to gain exposure to Bitcoin without self-custody. Galaxy Digital, Talos, and Virtu are firms specializing in digital asset trading and liquidity provision.
Regulatory changes enable in-kind swaps
In July 2025, the U.S. Securities and Exchange Commission (SEC) approved the use of in-kind creations and redemptions for spot Bitcoin and Ether funds, moving away from the previous cash-only structure. This regulatory shift expanded access and flexibility for institutional investors.
Initially, BlackRock’s minimum trade size for IBIT conversions was around $30 million, but it now ranges between $1 million and $2 million. Tax efficiency is also a consideration for participants. In-kind swaps are generally not classified as taxable sales, meaning many investors avoid immediate capital gains taxes, depending on individual circumstances. Mitchnick further pointed out that it is easier to manage estate planning when Bitcoin exposure is held through a private bank.
Once transferred, the Bitcoin is held by IBIT’s custodian, a Coinbase Prime affiliate, using an institutional-grade cold storage model. As of November 6, the fund held 795,921 BTC valued at approximately $60.4 billion.
| Year/Date | IBIT Conversion Volume | Minimum Trade Size | BTC Held by Fund (Nov 6) |
|---|---|---|---|
| October 2025 | $3 billion | ~$30 million | – |
| August 2026 | $5 billion | $1–2 million | 795,921 BTC ($60.4 billion) |
Headline flows and ETF withdrawals
When investors create IBIT shares through in-kind conversions, these transactions are reflected in reported fund flows, but they do not represent fresh Bitcoin purchases in the market, as the coins are merely reallocated rather than newly acquired.
Recently, cash has been moving out of U.S. spot Bitcoin ETFs. In the week ending November 6, these funds recorded net outflows of about $1.28 billion, with IBIT accounting for $1.21 billion of that total, Farside Investors reported.
Headline flow figures may exaggerate new demand since in-kind creations involve existing Bitcoin simply changing custody, rather than new buying activity.
Self-custody risks and shifting attitudes
Security fears driving these conversions have a well-documented basis. French authorities documented 77 crypto-linked kidnappings, extortion incidents, and home invasions in 2026, already surpassing totals recorded in 2025, according to the national organized crime prosecutor cited by the Organized Crime and Corruption Reporting Project (OCCRP).
Media outlets reported that the co-founder of hardware wallet firm Ledger suffered a kidnapping in which he lost a finger. In the U.S., a failed attempt in Connecticut to force a family to give up their Bitcoin underscores ongoing physical risks for holders.
Bitcoin security researcher Jameson Lopp maintains a publicly available list of physical attacks on cryptocurrency holders since 2014. Additionally, a security issue affecting Coldcard hardware wallets last August further heightened scrutiny over self-custody solutions.
This trend challenges the original Bitcoin ethos of self-sovereignty and holding assets outside the financial system. Investors opting for IBIT forego holding their own private keys in favor of an indirect claim managed through BlackRock and its custodians.
Mini dictionary: Farside Investors specializes in real-time ETF and flow data for cryptocurrency investment products. OCCRP is an investigative reporting platform focusing on organized crime and corruption worldwide.
