BlackRock backs 2% Bitcoin allocation as asset trades 50% off highs

BlackRock reaffirmed Bitcoin's investment case as a global monetary alternative, recommending a 1-2 percent portfolio allocation despite the asset trading 50 percent below its record high.

Bitcoin's investment case remains intact despite a 50 percent drawdown from its record high, BlackRock said in a research report published Tuesday.

"Bitcoin's core investment case as an important emerging global monetary alternative and unique portfolio diversifier remains unchanged," Robert Mitchnick, global head of digital assets at BlackRock, said in the report.

The report attributes the decline to crypto-specific leverage, slowing institutional inflows, and selling from large holders. Bitcoin futures open interest exceeded $90 billion in October 2025 before a liquidation cascade wiped roughly $20 billion from open interest in a single day on Oct. 10. Further liquidation waves followed in February and June.

BlackRock's trailing 10-year analysis found that allocating 1-2 percent of a traditional 60/40 portfolio to Bitcoin, funded from equities, would have improved risk-adjusted returns while broadly maintaining comparable portfolio risk. The report concludes the correction represents a "positioning correction rather than a change in its investment case."

What Drove the 50 Percent Drawdown

The report identifies several flow pressures behind Bitcoin's decline from its October peak of $126,080. Speculative positioning reached extreme levels in October 2025, with Bitcoin futures open interest exceeding $90 billion. The Oct. 10 liquidation cascade wiped around $20 billion from open interest in a single day, with further waves in February and June.

Institutional demand weakened after October as investor attention shifted toward artificial intelligence. AI-themed funds attracted more than $46 billion after October, compared with $5 billion in aggregate outflows from U.S. spot Bitcoin ETPs, according to the report.

Digital asset treasury companies added to the uncertainty. Strategy, which holds roughly 4 percent of Bitcoin's circulating supply, faced heightened scrutiny after selling a small amount of Bitcoin in June and introducing a capital-allocation framework allowing potential sales. Other large sellers included miners and long-time holders. A $1.3 billion block trade involving BlackRock's iShares Bitcoin Trust also contributed to the pressure.

Fiscal Dynamics Strengthen the Case

The report argues that rising U.S. and global government debt and deficits reinforce the strategic case for assets with supply constraints beyond the discretion of central banks. "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, governed by geology in the case of gold and mathematics and code in the case of bitcoin," the report said.

BlackRock also noted that Bitcoin's volatility has trended lower over the past decade as market structure has matured, supported by the growth of derivatives markets and exchange-traded products.

Bitcoin traded at $64,713 as of 15:30 UTC, up nearly 2 percent over the past day but flat over a 30-day period. Year-to-date, the asset is down 27 percent.

The SEC approved BlackRock's iShares Bitcoin Trust in January 2024, and the product has since become the most successful Bitcoin ETF by investment and trading volume. BlackRock manages roughly $15 trillion in assets.

The endorsement from the world's largest asset manager could help restore institutional confidence in Bitcoin as a portfolio diversifier. With the report explicitly framing the drawdown as a positioning correction rather than a thesis change, BlackRock's stance may encourage allocators to maintain or initiate small Bitcoin positions as fiscal concerns persist.

This article is for informational purposes only and does not constitute investment advice.