Bitcoin's Investment Case Hasn't Changed, BlackRock Says, Backs up to 2% Portfolio Allocation

Bitcoin’s investment case has not changed even as the asset trades 50% off its highs, according to a research paper published Tuesday by BlackRock ).Why Did BTC Drop From 50%BlackRock’s research sees crypto-specific leverage, slowing institutional inflows and selling from large holders as main drivers of Bitcoin’s decline.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 Bitcoin open interest in a single day. Further liquidation waves followed in February and June.The research argues these episodes explain Bitcoin’s temporarily elevated correlation with stocks. When leverage becomes excessive, forced liquidations can make BTC behave more like a conventional risk asset.At other times, Bitcoin has displayed its other "personality" as a macro hedge, including during the aftermath of the U.S.-Iran conflict.Did AI Steal Bitcoin’s Institutional Flows?Institutional demand weakened after October as investor attention increasingly shifted toward artificial intelligence.AI-themed funds attracted more than $46 billion after October compared to $5 billion in aggregate outflows in U.S. spot Bitcoin ETPs.Digital asset treasury companies added to the sources of uncertainty.Strategy ), which holds roughly 4% of Bitcoin’s circulating supply, faced heightened scrutiny after selling a small amount of Bitcoin in June and subsequently introducing a capital-allocation framework allowing potential BTC sales.Other large sellers included miners and long-time Bitcoin holders. There was also a $1.3 billion block trade involving BlackRock’s iShares Bitcoin Trust (NASDAQ:IBIT).These developments are cyclical flow pressures rather than evidence that institutional BTC adoption has structurally reversed.Is Bitcoin Still A Portfolio Diversifier?Despite Bitcoin’s volatility, the report argues its long-term correlation with traditional assets remains low enough to preserve its diversification case.BlackRock’s trailing 10-year analysis found that allocating just 1% to 2% of a traditional 60/40 portfolio to Bitcoin, funded from equities, would have improved risk-adjusted returns while broadly maintaining comparable portfolio risk characteristics.The report concludes that correction represents a "positioning correction rather than a change in its investment case."Image: Shutterstock