Bitcoin’s more than 50% decline from its October 2025 record has not changed BlackRock’s long-term view of the cryptocurrency, according to an August 2026 research report from the asset manager.
BlackRock attributed the downturn primarily to excessive leverage, weaker institutional demand and selling by digital-asset treasury companies, describing the correction as largely a positioning and liquidity event rather than evidence that Bitcoin’s underlying investment characteristics have fundamentally changed.
The firm, however, stressed that its assessment is not a prediction of a near-term recovery and warned that Bitcoin remains highly volatile and speculative.
Leverage Amplified Bitcoin’s Decline
Bitcoin climbed from roughly $15,765 in late 2022 to a record of about $124,606 in October 2025. During that rally, futures open interest climbed above $90 billion.
Approximately 80% of the peak exposure came from offshore perpetual futures markets, where some platforms offered leverage as high as 50x to 125x.
That leverage significantly increased the market’s vulnerability to forced liquidations.
Following U.S. tariff announcements involving China in October 2025, Bitcoin dropped around 6% while futures open interest fell by approximately $20 billion in a single day. BlackRock identified the event as the largest daily reduction in open interest in the data it analyzed.
Additional liquidation waves occurred in February and June 2026, eventually pushing Bitcoin below $60,000.
BlackRock argues that excessive positioning helped accelerate the downturn, although the firm does not claim leverage was the sole cause of the decline.
The U.S. derivatives landscape has also evolved during the correction, with the CFTC approving a regulated U.S. Bitcoin perpetual contract through KalshiEX in May.
Bitcoin ETP Outflows Weighed on Demand
Institutional flows also weakened during the correction.
BlackRock estimates that U.S. spot Bitcoin exchange-traded products attracted approximately $60 billion between their January 2024 launch and October 2025.
The products subsequently experienced around $5 billion in cumulative outflows through July 2026.
At the same time, AI-focused investment funds attracted more than $46 billion, creating competition for investor capital.
BlackRock said the shift toward AI investments likely contributed to weaker Bitcoin allocations, although fund-flow data alone cannot establish the precise reason behind individual investment decisions.
Bitcoin fund flows have since shown signs of recovery but remain inconsistent. Recent U.S. spot ETF data recorded approximately $297.5 million of inflows on Aug. 17 and another $189.3 million on Aug. 18, partially reversing withdrawals recorded during the previous week.
Corporate Bitcoin Selling Added Further Pressure
BlackRock also highlighted selling from miners, large Bitcoin holders and digital-asset treasury companies as another source of supply during the downturn.
MARA, for example, sold more than 15,000 BTC for approximately $1.1 billion in March.
Strategy has also introduced a Bitcoin monetization program that allows the company to sell Bitcoin to fund reserves, dividends, interest payments and preferred-share repurchases.
An SEC filing showed that Strategy sold 1,690 BTC for approximately $108.6 million between Aug. 3 and Aug. 9 and used the proceeds to repurchase preferred shares.
While the program does not require Strategy to sell Bitcoin, such transactions demonstrate how corporate treasury strategies can influence market supply during periods of weakness.
BlackRock Still Sees a Role for Bitcoin in Portfolios
Despite Bitcoin’s significant drawdown, BlackRock continues to support the argument for a modest Bitcoin allocation within diversified portfolios.
Its historical analysis found that adding 1% to 2% Bitcoin exposure to a traditional U.S. 60/40 portfolio improved hypothetical risk-adjusted returns over the period studied.
A 1% allocation produced a Sharpe ratio of 0.90, compared with 0.81 for the traditional portfolio. A 2% allocation increased the ratio to 0.96.
The differences in maximum drawdowns were relatively small. The traditional portfolio experienced a hypothetical 20.3% decline, compared with 20.6% for the 1% Bitcoin allocation and 20.9% for the 2% allocation.
BlackRock emphasized that these are historical simulations rather than guarantees of future performance. They do not represent an actual client portfolio, and diversification cannot eliminate losses.
Long-Term Bitcoin Thesis Remains Intact
BlackRock nevertheless argues that Bitcoin’s fundamental investment characteristics remain relevant.
The firm points to Bitcoin’s fixed supply, relatively low long-term correlation with traditional equities and its potential role as a hedge against declining fiat purchasing power.
Bitcoin’s 10-year correlation with the S&P 500 was approximately 0.18 in BlackRock’s analysis, suggesting that the asset has historically behaved differently from U.S. equities over long periods.
The firm therefore views the latest downturn as a significant correction rather than evidence that Bitcoin’s broader investment thesis has failed.
That distinction is important.
BlackRock is not predicting that Bitcoin will immediately recover or return to its previous highs. Instead, it argues that the factors responsible for the recent decline, particularly leverage and liquidity, do not necessarily invalidate Bitcoin’s longer-term portfolio characteristics.
What Comes Next?
The next phase of the market will likely depend on three key factors: spot Bitcoin ETP flows, derivatives leverage and corporate treasury activity.
Sustained institutional inflows combined with lower speculative leverage could strengthen BlackRock’s interpretation of the decline as a cyclical correction.
Conversely, renewed liquidations, persistent ETP outflows or continued selling from corporate Bitcoin holders could prolong the pressure.
For now, BlackRock’s position remains relatively measured: Bitcoin can experience severe drawdowns while still retaining a long-term role in diversified portfolios.
The 50% decline has therefore changed the market’s positioning, but according to BlackRock, it has not fundamentally changed the investment case.
