Even with bitcoin down about 50 percent from its peak, an analysis says a small bitcoin allocation can improve the risk-adjusted return of a traditional investment portfolio. BlackRock focused on the overall portfolio effect when bitcoin is held alongside existing assets, rather than bitcoin’s standalone volatility.

Bitcoin Magazine reported on Sept. 1 that BlackRock, in a recent report titled “Bitcoin Revisit Review: Is It Still a Portfolio Diversifier,” assessed that the rationale for allocation remains intact for institutional investors even after bitcoin fell about 50 percent from its October 2025 peak.

The key is not bitcoin’s volatility itself but the portfolio’s overall risk and return structure. BlackRock compared a traditional 60/40 stock-bond portfolio with portfolios that include some bitcoin, using 10 years of rolling data through May 29, 2026.

The analysis found the 60/40 portfolio had an annualised return of about 9.9 percent and an annualised standard deviation of about 10.1 percent. With a 1 percent bitcoin allocation, the annualised return rose to about 10.9 percent while the standard deviation edged up to 10.3 percent.

With bitcoin raised to 2 percent, the annualised return was about 11.8 percent and the standard deviation about 10.6 percent. While returns rose about 1.9 percentage points, volatility increased by only about 0.5 percentage points.

The Sharpe ratio, a measure of risk-adjusted return, also improved. The 60/40 portfolio’s Sharpe ratio was 0.81, rising to 0.90 with 1 percent bitcoin and 0.96 with 2 percent.

Maximum drawdowns also showed little difference. The existing portfolio’s maximum drawdown was -20.3 percent, and -20.9 percent with 1 percent bitcoin. BlackRock, while noting this is an assumption based on historical data, said evaluating bitcoin only by its volatility as an individual asset could miss portfolio-level effects.

The range BlackRock repeatedly presented in the analysis was a 1 to 2 percent bitcoin allocation. Earlier research also suggested that scale based on risk contribution. At the time, BlackRock assessed that a 1 to 2 percent bitcoin allocation in a traditional 60/40 portfolio can represent an overall risk contribution similar to adding one large technology stock. It also judged that above 2 percent, bitcoin’s risk contribution in the overall portfolio could grow disproportionately.

The report also focused on the additional return that can be gained by taking on additional risk. BlackRock’s analysis found that in both 1 percent and 2 percent allocations, the added return was greater than the added volatility.

BlackRock did not present 1 to 2 percent as an optimal allocation that can be applied to all investors. It said an appropriate allocation can vary depending on an investor’s liquidity needs, investment horizon, governance constraints and risk preferences.

BlackRock’s spot bitcoin ETF business also aligns with the analysis. BlackRock launched the iShares Bitcoin Trust (IBIT), a spot bitcoin ETF, in January 2024. IBIT surpassed $50 billion in assets under management in less than a year after launch and later grew into one of the world’s largest bitcoin ETPs.

IBIT also accounts for a significant share of the U.S. spot bitcoin ETF market. Data compiled by Bitcoin for Corporations shows U.S. spot bitcoin ETFs hold about 1.25 million bitcoin, or about 6 percent of bitcoin’s total issuance cap of 21 million. Of that, IBIT holds about 775,000 bitcoin, more than 60 percent of total U.S. spot ETF holdings.

BlackRock also attached significance to releasing the analysis not when bitcoin was at all-time highs but after a sharp drop. It cited liquidations of leveraged positions, a slowdown in ETP inflows and weakening demand from companies that had been accumulating bitcoin as factors behind the recent correction.

It did not view this as undermining the long-term investment rationale for bitcoin. Rather, it assessed that market positioning has adjusted, and said bitcoin’s fixed supply, decentralisation and independence from a specific country’s issuer remain valid.

The analysis says the way institutional investors assess bitcoin is also changing. In the past, the key question was whether they could hold an asset with volatility that is too high. Now, it said, the discussion is shifting toward a comprehensive assessment of allocation size and risk contribution, correlation with existing assets, liquidity, maximum drawdown and expected return.

BlackRock judged that companies can also approach bitcoin in a way similar to other strategic assets. That means setting an investment objective, defining a tolerable level of risk contribution, deciding the allocation after considering liquidity and governance requirements, and then periodically reviewing market conditions and investment assumptions.

The analysis, which says there is room to improve risk-adjusted returns for an overall portfolio even if bitcoin’s volatility is accepted, is expected to influence how institutional investors approach bitcoin.