BlackRock Sticks to Long-Term Bitcoin Thesis After 50% Drop

BlackRock maintains long-term Bitcoin case despite steep drawdown

BlackRock’s August 2026 research note argues that Bitcoin’s decline of more than 50% from its October 2025 peak does not invalidate the asset manager’s long-term investment thesis. The firm frames the sell-off as a liquidity and positioning event driven by heavy leverage, shifting fund flows and corporate treasury sales — not a fundamental breakdown of Bitcoin’s monetary characteristics or diversification potential.

Key takeaways

- Bitcoin retraced more than 50% from its October 2025 record high and hit June lows below $60,000. - Futures open interest surpassed $90 billion at the peak, with offshore perpetual contracts accounting for roughly 80% of that exposure. - Spot Bitcoin ETPs had attracted about $60 billion up to October 2025 and recorded roughly $5 billion in outflows through July 2026. - A corporate filing showed Strategy sold 1,690 BTC in early August and used $108.6 million to buy back preferred stock. - BlackRock’s historical tests suggest small allocations (1–2%) to Bitcoin improved hypothetical risk-adjusted returns for a traditional 60/40 U.S. portfolio.

Leverage and perpetual futures magnified the sell-off

BlackRock’s analysis highlighted that futures open interest moved above $90 billion near Bitcoin’s October 2025 high. Roughly 80% of that exposure derived from perpetual futures traded off-exchange. In some venues, traders were able to employ extreme leverage — reportedly between 50x and 125x — which made automatic liquidations commonplace after even modest adverse moves.

The first significant unwind occurred after U.S. tariff announcements involving China on Oct. 10, 2025, when Bitcoin fell about 6% and open interest dropped by around $20 billion in a single session. BlackRock described that day as the largest daily reduction in open interest within the dataset it reviewed. Further liquidation phases in February and June 2026 pushed prices below $60,000, reinforcing the firm’s view that excessive leverage amplified losses.

ETP flows, AI rotation and capital competition

Spot Bitcoin exchange-traded products were strong capital attractors after the January 2024 U.S. launches, amassing roughly $60 billion through October 2025, BlackRock said. That trend reversed modestly into mid-2026 with about $5 billion of aggregate outflows through July. At the same time, AI-focused funds enjoyed a massive inflow wave of more than $46 billion, and BlackRock suggested that this rotation likely competed for capital and diverted some investor attention away from crypto.

Retail and institutional indicators reinforced the narrative: crypto search interest and fund flows softened while AI equities drew attention. Recent U.S. fund flow snapshots were mixed but showed renewed inflows in mid-August — Farside recorded $297.5 million on Aug. 17 and $189.3 million on Aug. 18, totaling $486.8 million after the prior week’s $385.2 million of withdrawals.

Why flows matter for price recovery

Sustained ETP inflows can help soak up sell-side pressure and support price stability, while outflows accelerate declines when liquidity is thin. For BlackRock, the next credible signs that this episode was cyclical rather than structural will be sustained inflows into spot products, a meaningful reduction in speculative leverage, and clearer corporate balance sheet behavior.

Treasury sales and corporate monetization programs

BlackRock also flagged sales by miners, large holders and digital-asset treasury programs as additional supply-side contributors. Marathon Digital (MARA) reportedly sold about 15,133 BTC earlier in the year for roughly $1.1 billion, according to filings. Another filing from a company identified as Strategy disclosed sales of 1,690 BTC between Aug. 3 and Aug. 9, generating $108.6 million used to repurchase STRC preferred shares. Strategy’s broader monetization program allows sales to fund reserves, dividends and other corporate needs, and the August transaction provided a verified data point for BlackRock’s treasury-selling thesis.

Interaction with spot fund demand

Corporate sales interact directly with spot ETP demand: when corporate holders sell into the market at the same time as ETPs experience net outflows, price pressure intensifies. Conversely, if ETP inflows accelerate, they can absorb some of the selling from treasuries and miners and reduce downward momentum.

BlackRock’s portfolio allocation test

Using a 10-year historical simulation, BlackRock found that adding a small allocation to Bitcoin could have improved hypothetical risk-adjusted returns for a U.S. 60/40 portfolio. A 1% Bitcoin allocation produced a Sharpe ratio of 0.90 versus 0.81 for the benchmark; a 2% allocation raised the Sharpe to 0.96. Maximum drawdowns across tests were similar — the traditional 60/40 dropped 20.3%, while the 1% and 2% allocations produced 20.6% and 20.9% drawdowns, respectively.

BlackRock emphasized that these results are hypothetical, subject to hindsight bias, and do not represent actual client portfolios. They also warned that diversification cannot prevent losses and that Bitcoin remains volatile and speculative.

What BlackRock’s stance means for investors

BlackRock maintains its small-allocation argument but frames its conclusion as an investment assessment rather than an explicit market-timing call. The firm continues to manage the iShares Bitcoin Trust ETF and reiterates that Bitcoin is capable of extreme price swings and even total loss for holders.

As of Aug. 19, Bitcoin traded near $64,300 after reclaiming the $64,000 level. BlackRock’s thesis will be tested by future ETP flows, the scale of futures positioning, and corporate disclosures. If inflows remain consistent and speculative leverage declines, the firm’s cyclical correction explanation gains credibility. If renewed liquidations or persistent treasury selling continue, price pressures may persist.

Monitoring the market

Key metrics for traders and institutional investors to watch include futures open interest, perpetual funding rates, net ETP inflows/outflows, miner and treasury sales disclosed in filings, and broader fund rotations such as allocations to AI equities. Together, these indicators will offer the clearest evidence of whether Bitcoin’s decline was a transient liquidity event or the start of a more structural re-pricing.

BlackRock’s report underlines a central theme for crypto markets in 2026: when leverage, flows and corporate behavior align, they can produce rapid and deep drawdowns — but those episodes do not necessarily invalidate Bitcoin’s long-term narrative about capped supply and low long-run correlation with traditional equities.