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BlackRock Re-Underwrites Bitcoin After a 50% Drawdown
The firm's updated research says a measured 1% to 2% historical allocation improved a traditional portfolio's risk-adjusted returns. The real conclusion is about sizing, not certainty.
Bitcoin's roughly 50% retreat from its October 2025 high has forced institutions to test whether the portfolio thesis survives contact with another severe drawdown. BlackRock's digital-assets team says it does—but only in a measured form.
The firm attributes much of the selloff to crypto-native deleveraging and shifting investor flows rather than a fundamental change in Bitcoin's long-term investment case. Its updated ten-year historical analysis found that a 1% to 2% allocation would have improved risk-adjusted returns in a traditional 60/40 portfolio.
That is not a recovery forecast. It is an argument that a volatile asset can still affect portfolio efficiency when its weight is deliberately constrained.
Bitcoin's dual personality
BlackRock describes Bitcoin as alternating between two market behaviors. During broad deleveraging, it can trade alongside risk assets as investors sell liquid holdings and reduce exposure. During some periods of geopolitical disruption, it may behave as an alternative monetary asset.
The firm argues that episodes of elevated correlation with risk assets have been temporary rather than structural. Over longer horizons, it says Bitcoin has retained low correlation to traditional risk assets and positively skewed returns.
This is the tension behind the allocation case. Low average correlation does not prevent simultaneous losses during the moments when liquidity is scarce. Portfolio construction therefore depends on whether the long-horizon diversification benefit is large enough to compensate for violent short-horizon drawdowns.
The number is smaller than the headline
A 1% to 2% weight is meaningful precisely because Bitcoin's volatility can make a small capital allocation contribute a much larger share of total portfolio risk. The research does not support treating Bitcoin as a substitute for the entire defensive side of a portfolio.
The useful institutional question is no longer simply whether Bitcoin belongs in a portfolio. It is how much drawdown, liquidity pressure and correlation instability the portfolio can absorb without forcing a sale at the wrong time.
The next test is out of sample. Bitcoin must preserve distinct return behavior across future inflation, recession, fiscal and deleveraging regimes. If correlation with risk assets becomes persistently high—or if downside overwhelms the return asymmetry—the historical allocation case weakens.
Sources and disclosures
The drawdown description, correlation framework and 1% to 2% historical allocation result are BlackRock's own analysis. Historical results are model-dependent and do not guarantee future performance. BlackRock offers Bitcoin-related investment products, which is relevant context when assessing its conclusions. This article is analysis, not investment advice.
Update note
Published and publicly verified September 2, 2026.