Portfolio Rebalancing

When to use this skill

Use when the user asks about:

• Rebalancing their crypto portfolio
• Whether their current allocations are too concentrated
• Setting up a target allocation strategy
• Calculating what trades to make to reach target weights
• Deciding how often to rebalance

Rebalancing Framework

1. Current Portfolio Assessment

Gather and analyze:

• Holdings list: Each asset, quantity, and current USD value
• Current weights: Each holding as a percentage of total portfolio
• Total portfolio value: Sum of all positions
• Performance since last rebalance: Per-asset and total
• Concentration check: Any single asset > 30% of portfolio is a concentration risk flag

2. Target Allocation Design

Help define or review target weights based on risk profile:

Conservative (lower volatility):

• BTC: 40-50%, ETH: 25-30%, Stablecoins: 15-20%, Alts: 5-10%

Balanced (moderate risk):

• BTC: 30-40%, ETH: 20-25%, Large-cap alts: 15-20%, Mid-cap: 10-15%, Stablecoins: 5-10%

Aggressive (higher risk, higher potential):

• BTC: 20-25%, ETH: 15-20%, Large-cap alts: 20-25%, Mid/Small-cap: 20-30%, Stablecoins: 5%

Key constraints:

• No single alt should exceed 10% of portfolio
• Stablecoin allocation provides dry powder for opportunities
• DeFi positions (LP, staking) count toward the underlying asset allocation

3. Drift Analysis

Calculate how far each position has drifted from target:

Asset	Target %	Current %	Drift	Action
BTC	35%	42%	+7%	Trim
ETH	25%	20%	-5%	Add
SOL	10%	15%	+5%	Trim
Stables	10%	3%	-7%	Add

4. Rebalancing Triggers

Recommend a rebalancing approach:

• Calendar-based: Rebalance monthly or quarterly on fixed dates
• Threshold-based: Rebalance when any position drifts >5% from target (recommended)
• Hybrid: Check monthly, only act if drift exceeds threshold
• Avoid daily rebalancing — transaction costs and taxes erode returns

5. Trade Calculation

For each rebalancing trade:

• Direction: Buy or sell
• Amount: Dollar value to trade (target weight * portfolio — current value)
• Priority: Execute the largest drifts first
• Cost awareness: Factor in exchange fees, gas costs, and slippage
• Minimum trade size: Skip trades smaller than $50 — not worth the gas/fees

6. Tax and Cost Considerations

• Tax lots: When selling, consider which lots have the lowest tax impact (long-term vs short-term gains)
• Tax-loss harvesting: If any position is at a loss, selling and rebuying (or buying a correlated asset) captures the loss for tax offset
• Gas optimization: Batch trades during low-gas periods; consider L2s if available
• Net rebalance: Match buys and sells to minimize total transaction count

7. Output Format

• Portfolio value: Total current value
• Largest drift: Which asset and how far from target
• Rebalance needed: Yes / No (based on threshold)
• Recommended trades: Ordered list with asset, direction, amount
• Estimated costs: Total fees and gas for the rebalance
• Post-rebalance allocation: Projected weights after trades
• Next review date: When to check again