Surging leverage on crypto derivatives exchanges is magnifying market turbulence and casting doubt on bitcoin’s reputation as a dependable hedge, according to executives at BlackRock.

NEW YORK — While the iShares Bitcoin ETF (IBIT) has become one of the most successful ETF launches in recent Wall Street history, the broader crypto market’s reliance on borrowed money could weaken bitcoin’s standing with institutional investors, said Robert Mitchnick, head of digital assets at BlackRock.

Speaking at the Bitcoin Investor Week conference alongside Anthony Pompliano and investor Dan Tapiero, Mitchnick said bitcoin’s core investment thesis — rooted in scarcity and decentralization — remains unchanged. However, he warned that speculative trading on high-leverage derivatives platforms is distorting short-term price behavior.

He pointed to episodes where relatively minor headlines triggered steep sell-offs, arguing that such moves are often driven by forced liquidations and automated deleveraging in perpetual futures markets rather than shifts in fundamentals.

Although bitcoin is frequently described as a “global, scarce, decentralized monetary asset,” Mitchnick acknowledged that its recent price action resembles a leveraged technology index. If that pattern persists, he said, institutional allocators may find it harder to justify treating the asset as a long-term hedge or portfolio diversifier.

Mitchnick also rejected suggestions that spot ETFs like IBIT are fueling volatility. During a recent bout of market stress, the fund saw redemptions of roughly 0.2% of assets — modest compared with the billions of dollars in liquidations recorded across leveraged derivatives venues over the same period.

Despite the near-term swings, BlackRock continues to view digital assets as a key component of financial innovation. The firm sees its role as connecting traditional finance with the crypto ecosystem, anticipating that digital assets and blockchain-based technologies will play an expanding role in client portfolios in the years ahead.