In a new report titled "Re-Underwriting Bitcoin," Blackrock outlined why it believes the cryptocurrency's sharp decline reflects a redistribution of positions rather than a refutation of its core investment thesis. Bitcoin has fallen more than 50% from its all-time high of $126,300 recorded in October 2025, and the asset manager explained this drop with three overlapping factors, namely:
- The unwinding of crypto leverage
- A slowdown in institutional investment inflows
- Pressure from large holders, rather than any fundamental changes in Bitcoin's role as an alternative currency or portfolio diversification tool
Furthermore, the asset manager's report specified the mechanisms underlying the sell-off: it noted that by early October 2025, speculative positions had reached extreme levels, with Bitcoin futures open interest exceeding $90 billion. Then, on October 10, a chain liquidation occurred, wiping out roughly $20 billion of that open interest in a single day, followed by new waves of liquidations in February and June of this year.
The company also noted that funds focused on artificial intelligence (AI) attracted over $46 billion in the months following October—a shift of institutional capital towards a competing investment theme that likely exacerbated Bitcoin's weak performance, even though Blackrock believes its core prospects remain unchanged.
Where the Selling Pressure Came From
U.S. spot Bitcoin ETPs recorded cumulative outflows of approximately $5 billion during the market downturn, marking a significant reversal after these very products largely fueled the asset's rise in 2024 and 2025. Strategy, the Bitcoin asset management company formerly known as Microstrategy, sold a small portion of its Bitcoin holdings in June and implemented a new capital allocation system that explicitly permits further sales under certain conditions—a significant shift for a company that built its image on never selling its assets.
Blackrock's own fund—the iShares Bitcoin Trust, an ETF known under the ticker IBIT—was also party to a $1.3 billion block trade during this period, indicating how concentrated the flows from large institutional investors have become, despite cooling retail activity. Despite this pressure, Blackrock's flagship fund continues to attract fresh capital on up days.
Bitcoin.com News recently recorded a $479 million inflow into IBIT as Bitcoin exchange-traded funds (ETFs) extended their inflow streak, as well as a separate session where a $50.2 million inflow into Blackrock helped offset sales in other ETFs. These data points appear to suggest institutional demand has not disappeared but has become more selective about market entry timing during the downturn.
Bitcoin's "Dual Identity"
Another aspect highlighted in the report was Bitcoin and its "dual identity" within institutional portfolios: that is, sometimes the asset trades in sync with risk assets like stocks during large-scale deleveraging events, while at other times it acts as a hedge during geopolitical shocks.
Blackrock characterized periods where Bitcoin correlates more closely with stocks as episodic rather than structural, meaning the firm does not view the recent "risk-on/risk-off" trading pattern as a permanent change to Bitcoin's purpose.
In any case, this financial giant still recommends that investors maintain a small allocation to Bitcoin—in the range of 1% to 2% (by reducing the equity portion in a classic 60/40 stock and bond portfolio).
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