Add the uncooked macaroni into the Instant Pot. Pour the water over the pasta and top with the pieces of butter, salt, and pepper.Secure the lid onto your Instant Pot and make sure valve is in the sealing position.
Set to cook on high-pressure for 5 minutes. At the end of cooking, place a damp towel over the top of the instant pot and do a quick release. (The damp towel will help to eliminate spatter as the steam releases.)
Hit Cancel, and turn the instant pot on the sauté setting. Mix in the milk, Velveeta, and shredded cheddar cheese into the cooked macaroni. You can add more milk if needed. Stir constantly until all of the cheese is melted.
Turn off and allow to sit for a few minutes to thicken.