DIGITAL ASSETS
Crypto Allocation Inside a Diversified Book
Position sizing, volatility budgeting and the case for treating digital assets as a satellite sleeve rather than a core holding.
KEY TAKEAWAYS
- Size digital assets by volatility contribution, not by conviction.
- A satellite sleeve keeps a bad quarter survivable.
- Rebalancing turns volatility into a source of return.
Volatility budgeting
An asset three times as volatile as equities contributes roughly three times the risk per unit of capital. A 5 percent digital asset weight can therefore carry the risk of a 15 percent equity position. Size the risk, not the ticket.
Satellite, not core
A satellite sleeve is a position sized so that a total loss would be disappointing rather than damaging. For most investors that lands between 2 and 8 percent of the book.
Rebalancing is the discipline
Set a band around your target weight, for example plus or minus a quarter of the target. When the sleeve breaches the band, trade back to target. That mechanically sells strength and buys weakness without requiring a view.
This note is published for information only. It is not personal investment advice, and the value of investments can fall as well as rise.