BlackRock: Leveraged Derivatives, Not ETFs, Driving Bitcoin Volatility
Robert Mitchnick, head of BlackRock Digital Assets, warned at Bitcoin Investor Week that pervasive leveraged speculation on crypto derivatives platforms is amplifying Bitcoin volatility and could weaken its appeal as an institutional hedge. He said Bitcoin’s fundamentals as a scarce, decentralized monetary asset remain intact, but short-term trading increasingly resembles a “levered Nasdaq,” with cascading liquidations and auto-deleveraging on perpetual futures platforms producing large forced selling. Mitchnick disputed claims that spot Bitcoin ETFs are the main source of recent instability, noting BlackRock’s iShares Bitcoin ETF (IBIT) experienced only about 0.2% redemptions during a turbulent week while billions were liquidated on leveraged venues. BlackRock maintains it is bridging traditional finance and digital assets, but the executive highlighted leverage risk and the higher entry barriers this creates for risk-averse institutions.
Bearish
The message increases near-term downside risk for BTC. Highlighting that large forced liquidations on leveraged perpetual futures — not ETF flows — drove recent turbulence signals that leverage-induced selling can trigger rapid, outsized moves. In the short term, this raises volatility and the likelihood of sharp BTC drawdowns when funding-rate stresses or margin calls occur, making tactical traders more cautious and increasing the probability of stop runs. For liquidity-sensitive strategies (leveraged longs, derivatives basis trades), risk premia may widen and funding costs could spike. Over the longer term, Mitchnick’s view is neutral-to-slightly constructive for fundamentals: he affirms Bitcoin’s scarce, decentralized monetary attributes and notes institutional vehicles like IBIT showed minimal redemptions, implying ETFs can still provide stable on-ramps. However, persistent high leverage in derivatives markets could deter conservative institutional allocations, slowing broad-based demand growth and keeping a dampening effect on price appreciation compared with a scenario where spot ETF flows dominate price discovery.