Rebalancing

If you hold bitcoin as a small addition to your portfolio, you usually set a target share, say 5% of your assets. Because bitcoin fluctuates strongly, that share shifts quickly. Rebalancing brings it back to the target at fixed intervals or once it deviates by a set amount.

Example

You have $20,000 invested, $1,000 of it in bitcoin (5%). Bitcoin triples, the rest stays the same: now $3,000 of $22,000 is in bitcoin, around 13.6%. To get back to 5% ($1,100), you sell $1,900 of bitcoin and put the money into your other investments.

Why this matters

Without rebalancing, a small allocation turns into a large position after a rise – with a correspondingly large risk at the next crash. Bitwise, itself a provider of bitcoin products, ran the numbers for a portfolio of 60% equities and 40% bonds with 2.5% bitcoin from 2014 to 2025: the largest interim loss was around 51% without rebalancing and around 24% with annual rebalancing.^[1]

How to go about it

Either by calendar, say once a year, or by threshold, say as soon as the share falls below 3% or rises above 7% with a 5% target. Instead of selling, you can also direct your savings plan instalmentsGlossarySavings plan (Bitcoin savings plan)Automatically buying bitcoin at fixed intervals with a fixed amount, for example $50 a month. A savings plan takes the question of the right moment off your hands, but doesn’t promise a higher return.On the learning path: Stage 4 · Step 4 – Setting up a savings plan →In the glossary →× into the underweight part.

In Germany, gains from selling within one year of buying may be taxable; after that, they are tax-free (holding periodGlossaryHolding period (speculation period)In Germany, the gain from selling privately held bitcoin is tax-free if more than one year passes between purchase and sale (§ 23 EStG, as of September 2026). Each purchase has its own holding period.On the learning path: Stage 6 · Step 3 – Bitcoin & tax →In the glossary →×; as of September 2026, not tax advice).^[2] Other countries have different rules.