A growing number of large Bitcoin holders are converting their $BTC directly into ETF shares through a mechanism known as “physical redemption.” This process allows investors to exchange Bitcoin for ETF units without first selling their holdings for cash — a move that significantly reduces or even avoids taxable events. Traditionally, such conversions required liquidating BTC and repurchasing through an ETF, triggering capital gains taxes in the process.
According to BlackRock’s head of digital assets, more than $3 billion worth of these conversions have already taken place through the iShares Bitcoin Trust (IBIT), highlighting increasing institutional adoption of this structure. Other major ETF issuers, including Bitwise and Galaxy, are now following suit. This trend suggests that Bitcoin’s largest holders are seeking both regulatory clarity and capital efficiency — marking a subtle yet powerful shift toward deeper integration between crypto markets and traditional finance.
