BlackRock says Bitcoin remains a portfolio diversifier after 50% crash

BlackRock ↗ 0.63% published a report on Monday arguing that Bitcoin remains a viable long-term portfolio diversifier despite losing roughly half its value since October 2025, when it peaked above $126,000 before a cascade of forced liquidations dragged it below $60,000 by June 2026.bitbo+1

The report, titled "Re-Underwriting Bitcoin: Still a Portfolio Diversifier," represents the world's largest asset manager's most detailed post-crash assessment of the cryptocurrency's investment case.blackrock

Leverage, Not Fundamentals

Robert Mitchnick, BlackRock's global head of digital assets, and co-author Will Su attributed the drawdown to a positioning correction rather than a breakdown in Bitcoin's thesis. Futures open interest had exceeded $90 billion by early October 2025, with roughly 80% concentrated in offshore perpetual contracts offering up to 125x leverage. When the U.S. announced fresh China tariffs on Oct. 10, 2025, open interest fell $20 billion in a single day — the largest such drop on record.bitbo

"We view bitcoin's ~50% pullback from October 2025 highs as a positioning correction rather than a change in its investment case," the authors wrote.bitbo

The firm also noted that spot Bitcoin ETPs bled roughly $5 billion in outflows after attracting $60 billion between January 2024 and October 2025, with much of that capital rotating into AI-themed funds that absorbed $46 billion over the same period.bitbo

The Allocation Case

BlackRock's updated 10-year analysis found that a 2% Bitcoin allocation lifted a traditional 60/40 portfolio's Sharpe ratio from 0.81 to 0.96, with maximum drawdown barely changing. The firm reiterated its guidance that a modest 1–2% allocation can improve risk-adjusted returns.thestreet+2

Bitcoin's 10-year correlation to the S&P 500 stands at 0.18, below commodities, emerging-market equities, and high-yield bonds. BlackRock characterized recent correlation spikes with equities as "episodic rather than structural."bitbo

Institutional Infrastructure Expands

The report landed as Bitcoin tested the $65,000 level on Tuesday. Meanwhile, Citi Citigroup Inc. ↘ 0.62% unveiled Custody+, a platform that will bring Bitcoin custody to institutional clients later this year alongside traditional assets, backed by what the bank says is more than $2 billion in annual platform spending.finance.yahoo

BlackRock's iShares Bitcoin Trust ETF ↗ 0.49% held approximately $48 billion in net assets as of Aug. 17, despite a roughly 26% year-to-date decline. The firm noted that client buying rebounded in late July, even with the average U.S. spot ETF buyer sitting 22% underwater.thestreet+1

"With no credible path for consolidation on the horizon, these fiscal dynamics reinforce the strategic case for assets with supply constraints beyond the discretion of central banks," BlackRock wrote, "governed by geology in the case of gold and mathematics and code in the case of bitcoin."bitcoinmagazine