BlackRock lowers Bitcoin ETF in-kind conversion minimum to $1M

• BlackRock's Robert Mitchnick stated that the company has reduced the minimum for Bitcoin ETF in-kind conversions from $25 million to $1 million.
• The lower threshold allows investors with $1 million in Bitcoin to facilitate in-kind conversions through authorized participants and receive IBIT shares.
• Mitchnick said BlackRock’s BITA fund targets investors seeking mid-to-high-teens yield while accepting reduced Bitcoin upside and lower volatility.

BlackRock’s Head of Digital Assets Robert Mitchnick said the company has reduced the minimum for Bitcoin (BTC) exchange-traded fund (ETF) in-kind conversions from $25 million to $1 million.

BlackRock drops minimum in-kind conversion rate to $1 million

The lower threshold allows investors with $1 million worth of Bitcoin to facilitate in-kind conversions through authorized participants and receive shares of BlackRock’s iShares Bitcoin Trust (IBIT).

In an interview with Bloomberg analysts Eric Balchunas and Isabelle Lee on Monday, Mitchnick noted that the process remains intermediated, meaning BlackRock does not directly facilitate the transactions with individual investors.

Mitchnick said in-kind creations and redemptions remain a minority of activity within the Bitcoin ETF market, with most inflows coming from new dollars.

However, he said the amount of in-kind activity has grown since regulators permitted the feature, prompting BlackRock to work on lowering the minimum threshold.

Coldcard hack reflects security mismanagement issues

Mitchnick also addressed the recent hack involving Coldcard wallets, describing it as a security failure rather than a breach of Bitcoin’s underlying network.

“Unfortunately, with that incident, it was a fairly simple, sort of amateurish error that led to the vulnerability,” Mitchnick said.

He added that crypto hacks involving individual wallets or service providers reflect “individual security mismanagement issues.”

Mitchnick said the incident underscores why many investors have turned to regulated Bitcoin ETFs, which provide exposure without needing to manage private keys and other custody risks themselves.

“What we’ve seen, frankly, since the start of the Bitcoin ETFs being available in January of two years ago was an overwhelming demand to be able to hold in a very simple turnkey trusted vehicle,” he stated.

Bitcoin ETF holders remain long-term focused

Despite Bitcoin's decline from its all-time high in October, Mitchnick said BlackRock has not seen evidence of widespread panic among its ETF investors.

“The ETF investor base tends to be more of a fundamental long-term buy and hold type segment,” he said, adding that this behavior has continued during the downturn.

Mitchnick noted that Bitcoin has experienced five major boom-and-bust cycles and remains a volatile asset. However, each cycle has ended at a higher level than the previous one, he added.

He also pointed to Bitcoin’s recent decoupling from equities as a potentially healthy development for the asset’s long-term diversification thesis.

Mitchnick also discussed BlackRock’s new Bitcoin premium-income ETF, BITA. The product targets investors willing to sacrifice some potential Bitcoin upside in exchange for a mid-to-high-teens target yield and reduced volatility.

He added that BITA is off to a solid start, although he expects its growth to be slower than flagship products such as the iShares Bitcoin Trust (IBIT).

Bitcoin is trading at $63,940, down 1.7% over the past 24 hours at the time of writing.