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BTC Key Points
BlackRock lowered its minimum threshold for physical creation for Bitcoin ETF IBIT by 96% to US$1 million.
More than US$5 billion in Bitcoin has been transferred from private wallets to IBIT.
IBIT conversion converts Bitcoin into ETF shares without the need for direct cash sales.
Bitcoin ETF conversion transfers existing positions to IBIT
BlackRock significantly reduces the entry threshold for large bitcoin holders to convert their existing bitcoin exposure into iShares bitcoin trust shares. The minimum transaction size for eligible IBIT physical conversions is now US$1 million, a decrease of 96% from US$25 million.
According to Robbie Mitchnick, head of digital assets at BlackRock, the change expands access to the process, which has processed more than $5 billion in Bitcoin. When Bloomberg reported on this trend in October 2025, the total had exceeded $3 billion.
The physical process allows eligible holders to exchange Bitcoin for IBIT shares without first selling their tokens for cash. However, only authorized participants can create or redeem shares directly with the trust fund.
Therefore, Bitcoin holders typically need a broker, trading desk, or other qualified intermediary to arrange transactions. Ordinary investors can still buy and sell IBIT shares on Nasdaq without using the creation process.
BlackRock cuts its Bitcoin ETF IBIT
The U.S. Securities and Exchange Commission approved the physical creation and redemption of spot cryptocurrency exchange-traded products in July 2025. The original approval of spot cryptocurrency ETFs required issuers to use cash for transactions.
BlackRock reported that as of August 25, IBIT's net assets were approximately US$60.65 billion. The fund charges a 0.25% sponsorship fee and holds approximately 22.65 bitcoins per creation basket. BlackRock valued each basket at approximately $1.79 million that day, but its value fluctuated with the Bitcoin market price.
According to Bloomberg, Bitwise also lowered its conversion threshold. Its minimum limit was reportedly reduced from $100 million to $3 million.
Security concerns are prompting some bitcoin holders to abandon self-custody
The introduction of a lower threshold comes as some bitcoin holders are reconsidering the risks of directly managing assets.
Mitchnick said reports involving kidnappings, extortion, hacking and custody failures could affect decisions to self-host. Such events may cause holders to transfer some or all of their Bitcoin exposure to the ETF structure.
Bitcoin ETF eliminates the need for investors to manage mnemonic words, hardware wallets and private key backups. However, this structure has also changed the way they control exposure.
IBIT shareholders cannot withdraw the underlying bitcoin, transfer it to personal wallets, or use these tokens to make payments. Instead, they hold shares of exchange transactions designed to track the value of Bitcoin (before deducting fees and expenses).
Tax treatment still depends on conversion structure
Bloomberg reported that certain conversions may allow holders to avoid capital gains by selling Bitcoin directly before purchasing ETF shares. However, this result does not apply automatically.
Tax treatment may depend on the investor, intermediary, jurisdiction, and legal structure used in the transaction. The SEC's physical approval does not establish any special investor tax treatment.
As a result, lowering the limit to US$1 million changes the entry conditions for BlackRock's IBIT conversion process, while tax treatment, intermediary requirements and loss of direct Bitcoin control remain important components of every transaction.
