Portfolio rebalancing is a strategy that has been used by investors for decades. Implementing rebalancing as a strategy for a portfolio means the investor must first determine how much of their portfolio they want to allocate to each asset. In the case of cryptocurrencies, each asset would be a coin or token. These allocations are simply the percent of each crypto asset that should be represented in the total value of the combined portfolio. When it is time to rebalance the portfolio, the coins are traded such that the value held in each asset is once again equal to the percentages that were originally specified.

Let’s look at an example. Say you have a portfolio where you have 4 different cryptocurrencies: BTC, ETH, LTC, and XMR. You have determined that you would like each of these four cryptocurrencies to have an equal 25% stake in your portfolio. This means, at the end of a rebalance, your portfolio would consist of 25% in each of these 4 assets. Since coins don’t generally cost the same per coin, the value should be calculated in fiat or a base currency, so the different coins won’t be equal in quantity, but in value. So, if you had $100 total between these four assets, you would have $25 in each after a rebalance took place.