Definition ∞ Portfolio optimization involves structuring an asset collection to achieve specific risk and return objectives. This financial practice aims to select an optimal combination of digital assets that maximizes expected returns for a chosen level of risk tolerance, or minimizes risk for a desired return. It considers factors such as asset correlations, volatility, and individual asset performance. Advanced algorithms and analytical models are often employed to construct efficient portfolios.
Context ∞ Portfolio optimization is a constant subject in crypto news for investors seeking to manage their digital asset holdings effectively. The high volatility of cryptocurrency markets makes robust optimization strategies particularly important. Discussions often focus on diversification across different asset classes, rebalancing techniques, and the use of decentralized finance protocols for yield generation.
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