BlackRock cut the minimum direct BTC-to-IBIT conversion from $25 million to $1 million, a 96% reduction, and says more than $5 billion has already moved through the process. Holders contribute bitcoin and receive ETF shares through the fund’s authorized-participant machinery. They keep the price exposure, hand custody to Wall Street, and may avoid an immediate taxable cash sale depending on their circumstances.
There are two rational reasons to do this. The first is that Coldcard, seed phrases, and physical security scare the hell out of people. This is an education problem. Holding your own keys is easier than driving a car, and the risk that you make a mistake and die is considerably lower. Normal people can figure out self-custody regardless of their circumstances. They just have to want to.
The second reason is more practical. ETF shares sit inside a conventional brokerage account that can support securities-backed borrowing at institutional rates. Those rates are generally far more attractive than the market for loans secured directly by spot bitcoin. For a wealthy holder who needs liquidity, the financial incentive currently points away from self-custody.
That incentive is backward. Direct bitcoin should ultimately become the best collateral as lenders continue to understand it and improve their custody, monitoring, and liquidation infrastructure. Competition should push those loan rates toward the cheaper economics available against IBIT, and ultimately below IBIT pricing. IBIT adds layers of counterparty risk, custody risk, and fees that spot bitcoin as a collateral asset does not inherently have. Until the lending market catches up, it is effectively paying large holders to give BlackRock their keys.