BlackRock has reaffirmed its long-term investment case for Bitcoin despite a brutal sell-off that erased more than half of the cryptocurrency’s value from its October 2025 peak, arguing that the downturn has not undermined its role as a global monetary alternative and portfolio diversifier.
In a report published Monday titled Re-Underwriting Bitcoin: Still a Portfolio Diversifier After the Pullback?, BlackRock said Bitcoin’s roughly 50 percent decline from its record high reflected leverage, shifting investor flows and market positioning rather than a fundamental change in its investment thesis.
The asset manager said Bitcoin’s core case as an emerging monetary alternative and a distinctive portfolio diversifier remained unchanged.
Bitcoin surged nearly 700 percent from its late-2022 lows to an all-time high of about $124,600 in October 2025 before falling below $60,000 by June 2026, according to the report.
BlackRock attributed much of that decline to an overcrowded derivatives market that became increasingly vulnerable as speculative positioning built alongside the rally.
By early October 2025, Bitcoin futures open interest had climbed above $90 billion, with about 80 percent concentrated in perpetual futures outside CME. Some venues offered leverage of as much as 50 to 125 times, leaving traders exposed to forced liquidations when prices turned lower.
The pressure intensified on Oct. 10, when fresh U.S tariffs on China triggered a broader risk-off move. Bitcoin fell 6 percent that day as open interest dropped by about $20 billion, the largest single-day decline on record, according to BlackRock, before further liquidation waves in February and June pushed the cryptocurrency to cycle lows below $60,000.
AI boom pulls capital away from Bitcoin
BlackRock said the downturn was compounded by a sharp reversal in institutional fund flows.
Spot Bitcoin exchange-traded products attracted about $60 billion between January 2024 and September 2025. From October 2025 through July 2026, however, those products recorded roughly $5 billion in net outflows.
BlackRock’s data showed that investor money was shifting elsewhere, with AI-themed funds attracting about $46 billion over the same period after drawing roughly $10 billion during the earlier Bitcoin ETP boom.
The firm said the shift toward AI-exposed equities likely competed with Bitcoin for capital and weighed on crypto allocations, but characterized the rotation as cyclical rather than evidence that institutional adoption had structurally reversed.
Concerns over digital asset treasury companies also weighed on Bitcoin after Strategy, which holds about 4 percent of circulating supply, sold 32 Bitcoin in June and later authorized potential future sales under an updated capital-allocation plan.
BlackRock also pointed to increased selling by large holders, miners and institutional investors, including a $1.3 billion block trade involving its iShares Bitcoin Trust ETF in May.
BlackRock sticks with the monetary hedge thesis
Despite the drawdown, BlackRock argued that Bitcoin’s fixed supply remains central to its appeal as governments contend with rising debt and deficits and investors weigh the long-term risk of currency debasement.
The firm compared Bitcoin’s scarcity with gold, noting that neither asset’s supply can be expanded at the discretion of central banks. Its analysis found that the major developed-market currencies it examined had lost more than 99 percent of their value against gold over the past century when measured as cash holdings.
Bitcoin has also maintained relatively low long-term correlations with traditional markets, according to BlackRock. Its 10-year correlation with the S&P 500 stands at 0.18, compared with 0.06 for gold and significantly higher readings for emerging-market equities and high-yield bonds.
BlackRock acknowledged that Bitcoin can temporarily trade like a risk asset during periods of heavy leverage and forced selling, but said those episodes have historically been temporary. The firm believes the significant deleveraging since October could allow Bitcoin’s correlation with equities to fall again as speculative positioning resets.
Small allocations still make the case
Bitcoin remains far more volatile than stocks, bonds or gold, though BlackRock said that volatility has declined as the market structure has matured.
Trailing 12-month realized volatility stood at about 40 percent as of June 30, down from repeated spikes above 100 percent a decade ago. BlackRock attributed the longer-term decline to deeper liquidity and the expansion of regulated futures, options and spot exchange-traded products.
The firm’s 10-year hypothetical analysis also found that adding a 1 percent to 2 percent Bitcoin allocation to a traditional U.S 60/40 stock-and-bond portfolio would have improved risk-adjusted returns while leaving overall risk broadly comparable.
BlackRock cautioned that Bitcoin remains inherently volatile and that its historical analysis does not guarantee future results.
Still, the firm concluded that the roughly 50 percent drawdown represented a major positioning correction rather than a collapse in Bitcoin’s underlying investment case, leaving its potential role as a scarce monetary asset and strategic portfolio diversifier intact.
