BlackRock Links Bitcoin Decline to Leverage and Institutional Fund Flows

BlackRock, the world's largest asset manager, attributed the recent decline in Bitcoin to excessive leverage and weakening institutional fund flows. According to a research report published in August, these factors led to a sharp contraction in futures positions and treasury sales by companies holding crypto in their treasuries.

The firm noted that open interest in futures exceeded $90 billion near the peak of Bitcoin's price at $124,606 in October 2025. Approximately 80% of this amount consisted of perpetual contracts outside regulated derivatives exchanges, with some platforms offering leverage between 50 and 125 times.

This led to automatic liquidations on small price movements, resulting in a first major unwinding on October 10, 2025, following the US decision on tariffs against China. New waves of liquidations came in February and June, pushing the price below $60,000.

BlackRock also highlighted that spot Bitcoin exchange-traded products saw inflows of approximately $60 billion from their US launch in January 2024 through October 2025, but experienced total outflows of $5 billion through July 2026. During the same period, artificial intelligence-themed funds gathered inflows exceeding $46 billion.

However, in recent days, the picture has partially changed, with funds seeing inflows of $297.5 million on August 17 and $189.3 million on August 18. In a ten-year backtest, BlackRock found that adding small allocations of Bitcoin to a traditional portfolio improved risk-adjusted returns.