After Bitcoin fell more than 50% from its October 2025 peak, BlackRock—the world’s largest asset management company—offered the view that the investment logic has not changed. In a research report published by BlackRock’s Digital Assets team, Will Su and Robert Mitchnick, titled (Re-Underwriting Bitcoin), the report attributes this sharp drop to “position deleveraging and fund flows,” rather than a shift in Bitcoin’s core investment value. The report also reiterates that allocating 1% to 2% of Bitcoin within a traditional 60/40 portfolio can still help improve risk-adjusted returns.
How did the big drop happen: leverage blowouts, plus funds being siphoned away by AI-themed assets
The report breaks this round of pullback into two lines. The first is deleveraging. When Bitcoin surpassed a high point of roughly $124,600 last October, open interest in futures briefly exceeded $90 billion, about four-fifths of which came from offshore perpetual contracts outside the CME. Some platforms used leverage as high as 50 to 125 times. On October 10, when the U.S. announced new tariffs on China, global risk assets sold off sharply. Bitcoin fell 6% that day and Ether dropped 11%. Open interest in Bitcoin evaporated by $20 billion in a single day — the largest one-day decline on record. After that, several waves of forced liquidations in February and June pushed prices down to below $60,000.
The second is capital flows. Spot Bitcoin ETPs pulled in about $60 billion from January 2024 to September 2025, but during sell-pressure periods there were net outflows of about $5 billion. At the same time, AI-themed funds siphoned off about $46 billion—investors’ attention and capital clearly shifted from Bitcoin to AI. In addition, concerns have been raised about the balance-sheet sustainability of the corporate “digital asset treasury” (DAT). The largest holder, Strategy, disclosed a trial sale of 32 bitcoins in June alone (just 0.004% of its holdings), which triggered a sharp market reaction: Bitcoin fell by about 20% at one point and for the first time since 2024 broke below $60,000. BlackRock believes these are cyclical capital movements rather than a structural shift toward long-term institutional adoption of Bitcoin.
BlackRock’s thesis: low correlation, positive skew, and resilience to fiat currency depreciation
Leaving aside short-term volatility, the report reiterates three characteristics of Bitcoin’s role in a portfolio. First, low correlation: over the past decade, Bitcoin’s correlation with the S&P 500 was about 0.18—higher than gold’s 0.06, but far lower than commodities (0.29), emerging-market equities (0.57), and high-yield bonds (0.69). BlackRock notes that during periods such as the 2022 rate-hiking cycle and the 2025 tariff shocks, Bitcoin did move in the same direction as risk assets at times, but these should be viewed as occasional rather than structural. After the deleveraging that began last October, the correlation should decline again. Second, positive skew in returns: the past decade’s monthly return distribution for Bitcoin shows a more pronounced upside tail than stocks. Third, resilience to depreciation: the report emphasizes that over the past century, every developed-market fiat currency against gold has depreciated by more than 99%. With government debt and deficits continuing to rise and the supply of constrained assets limited, assets with constrained supply carry greater strategic value.
On volatility, the report also says Bitcoin’s annualized volatility has fallen from above 100% a decade ago to below 50% for most of the past 2 to 3 years (about 40% over the past 12 months), which is higher than gold (26%) and the S&P 500 (12%). This reflects greater market maturity brought by derivatives and ETPs. However, the growth in leverage within perpetual contracts has partially offset this downward trend.
10-year backtest: a 1–2% allocation lifts the 60/40 Sharpe ratio from 0.81 to 0.96
The report presents a ten-year backtest from May 2016 to May 2026. In a traditional 60/40 stocks-and-bonds portfolio, shifting 1% from stocks to Bitcoin (59/40/1) produces a Sharpe ratio of 0.90; shifting 2% (58/40/2) raises it to 0.96—both higher than the pure 60/40 Sharpe ratio of 0.81, with a similar maximum drawdown magnitude (around -20%). BlackRock’s conclusion is that once the roughly 50% drawdown is understood as a “position adjustment” rather than a change in investment logic, Bitcoin’s role as a low-correlation diversifier and a substitute for currency still holds. Long-term investors may increasingly prefer to incorporate it into traditional portfolios with a “disciplined allocation.” A reminder: this is BlackRock’s view and historical backtesting from its perspective as issuer of the world’s largest spot Bitcoin ETF (IBIT). It is institutional, stance-based research, and past performance does not indicate future results.
In the earliest appearance, this article “BlackRock: Even if Bitcoin falls by more than 50%, it is still a diversifier; a 1–2% allocation remains attractive” first appeared on Chain News ABMedia.