Crypto Portfolio Rebalancing Between Cash and Bitcoin

Summary

This document explains a threshold-based rebalancing strategy adapted from a stock-and-bond allocation model to a cash and Bitcoin portfolio. It starts with equal values in cash and BTC, then sells BTC after appreciation or buys it after a decline when the allocation gap exceeds a threshold. The aim is to keep the two holdings near equal value and systematically trade against price moves.

The article outlines account and ticker data inputs, trade sizing, order placement, and cancellation of unfilled orders. It also reports a historical backtest during an extended BTC downturn, claiming substantial cumulative gains and a strong annualized risk-return measure. Those results are presented without enough detail here to assess fees, slippage, benchmark choice, or robustness. The strategy depends on the allocation threshold, asset mix, and execution quality; the example does not establish that rebalancing will be profitable across other periods or portfolios.

Key ideas

• The strategy begins with equal cash and Bitcoin market values.
• It buys Bitcoin after declines and sells after rises when the allocation imbalance crosses a threshold.
• Trade size is based on half the difference between cash and the Bitcoin position value.
• The implementation includes minimum order sizing and cancellation of pending orders.
• Backtest performance is reported, but the document does not provide enough evidence to establish robustness.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.