Asset rebalancing involves adjusting a portfolio’s asset allocations to return them to their predetermined target weights. This process helps maintain a desired risk profile and investment strategy over time. It typically requires selling assets that have performed well and purchasing those that have underperformed. For digital assets, this strategy assists in managing exposure to volatile cryptocurrency markets.
Context
In the digital asset space, asset rebalancing serves as a critical risk management practice for decentralized finance (DeFi) portfolios and cryptocurrency funds. Automated rebalancing protocols and smart contracts are increasingly prevalent, enabling efficient adjustments without manual intervention. Discussions often revolve around optimal rebalancing frequencies and the associated transaction costs for on-chain adjustments.
The unified cross-margin primitive abstracts fragmented collateral into a single, portfolio-wide risk account, radically boosting capital efficiency for active DeFi traders.
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