Head of Digital Assets at BlackRock: Volatility Fueled by Leverage Poses Risks to Bitcoin’s Story

Widespread speculation on cryptocurrency derivatives platforms is driving volatility and jeopardizing bitcoin’s reputation as a reliable hedge, according to BlackRock’s digital assets head.

(Emanuele Cremaschi/Getty Images)

What to know:

• BlackRock digital-assets head Robert Mitchnick cautioned that significant leverage usage in bitcoin derivatives is compromising the cryptocurrency’s attractiveness as a reliable hedge for institutional portfolios.
• Mitchnick noted that bitcoin’s foundational qualities as a scarce, decentralized monetary asset remain robust, yet its trading patterns increasingly resemble a “levered NASDAQ,” making it more challenging for conservative investors to embrace.
• He contended that exchange-traded funds like BlackRock’s iShares Bitcoin ETF are not the primary drivers of volatility, instead attributing this to perpetual futures platforms.

NEW YORK — Although BlackRock’s iShares Bitcoin ETF (IBIT) stands out as one of the most successful product launches in Wall Street history, the growing dependence on leverage within the crypto market may be causing long-term harm to bitcoin’s BTC$70,413.42 institutional attractiveness, as stated by Robert Mitchnick, head of digital assets at BlackRock.

In a discussion with Anthony Pompliano and investor Dan Tapiero during the Bitcoin Investor Week conference in New York on Thursday, Mitchnick emphasized that despite bitcoin’s strong fundamentals, rampant speculation—particularly on leveraged derivatives platforms—is causing instability that threatens its standing as a legitimate portfolio hedge.

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“Currently, instances where minor events that should have negligible price impacts instead lead to significant fluctuations—such as on October 10th, when some tariff-related news caused bitcoin to drop 20%—are concerning,” Mitchnick remarked. “This occurs due to cascading liquidations and auto-deleveraging.”

Even as bitcoin’s long-term value as a “global, scarce, decentralized monetary asset” remains intact, Mitchnick warned that the asset’s short-term trading behavior is dangerously mirroring that of a “levered NASDAQ,” a perception that may dissuade conservative investors from participating.

“The data supports my assertions,” he stated, referring to bitcoin’s fundamental characteristics. “However, the recent trading statistics appear quite different, and the threshold for adoption is significantly higher if it behaves like a levered NASDAQ.”

Mitchnick also countered the notion that exchange-traded funds (ETFs) like IBIT are causing volatility, redirecting attention to perpetual futures platforms as the root of the instability.

“There is a widespread misconception that hedge funds in ETFs are generating volatility and selling; that’s not what we’re observing,” he clarified. “During a tumultuous week in the bitcoin market, only 0.2% of the fund was redeemed. If hedge funds were massively unwinding trades, we would have witnessed billions in liquidations. Instead, we saw billions liquidated on these leveraged platforms.”

In spite of the short-term fluctuations, Mitchnick reaffirmed BlackRock’s commitment to digital assets as part of a larger financial evolution.

“We view ourselves as a bridge between traditional finance and the digital asset realm,” he stated. “Over time, there will undoubtedly be an increasing role for digital assets and this technological theme for many of our clients.”

Read More: Bitcoin May Evolve Into Low-Beta Equity Play Reflexively, BlackRock’s Mitchnik Says