GlossaryIntermediate
Rebalancing
Adjusting a portfolio's holdings back toward a previously chosen target allocation.
Rebalancing means buying or selling holdings to bring a portfolio's actual allocation back in line with a previously chosen target allocation, which tends to drift over time as different assets perform differently.
It's a general portfolio-management discipline, not specific to crypto, though applying it to a volatile crypto portfolio can mean fairly frequent drift from target percentages.
Examples
- A portfolio targeting a 50/50 split might need rebalancing after one asset significantly outperforms the other.
- Rebalancing generally involves selling some of an outperforming asset and buying more of an underperforming one.