Rebalancing a Crypto Portfolio: Thresholds, Schedules, and Tax Friction

Rebalancing restores a portfolio to its target allocation. If you target 60% SOL / 40% USDC and SOL rallies until you're 80/20, rebalancing sells SOL back to 60% — automatically taking profit on the winner.

Two trigger styles: threshold rebalancing fires when an allocation drifts past a band (e.g., ±5%) — trades only when needed but unpredictable in timing. Scheduled rebalancing runs weekly or monthly — simple and disciplined, but may trade when barely drifted or sit too long during fast moves.

The hidden costs: every rebalance is a taxable event in most jurisdictions (selling a winner realizes gains), and trading fees compound — rebalancing too often can cost more than it earns. The benefit is real though: it forces selling high and buying low systematically, which most humans can't do emotionally.

Worth rebalancing when: allocations matter to your risk (a 90% memecoin portfolio isn't the 50% you intended). Not worth it for tiny drifts — let winners run inside a band.