Intermediate level
Running a portfolio means deciding in advance how large each position may be, when you will rebalance and how you will keep records, so the decisions happen before the emotions do. Size by the loss you can accept, rebalance on a calendar or when weights drift past a band, remember that in the US each rebalancing sale can realize a taxable gain, and track cost basis wallet by wallet, as US rules have required since January 1, 2025. This is education, not advice.
Write the policy before the market tests it
In a market this fast, decisions made on the spot are the expensive ones. Prices can fall by half in weeks, most assets fall together when they do, and the moment a decision matters most is the moment it is hardest to think clearly. The answer professionals use is a short written policy, decided while calm:
- Targets. The weight you intend for each holding or group of holdings.
- Limits. The largest any single position may grow before you act.
- A rebalancing rule. When you restore the targets, and how.
- A buffer. How much you keep in stablecoins, and what it is for.
- A record system. Where every wallet, trade and transfer gets written down.
Sizing by risk, not by conviction
For a trade with a stop, size falls out of one division. Decide the most the trade may cost, decide the price at which you are wrong, and divide:
A position worth 6.7% of the account risks 1% of it. The position size calculator does the arithmetic, and risk management covers the discipline around it.
Long term holdings usually have no stop, so size them by the drawdown you could live with instead. The loss to the portfolio is simply the weight times the fall:
| Position weight | Value in a $50,000 portfolio | If it falls 50% | If it falls 90% |
|---|---|---|---|
| 2% | $1,000 | −1.0% of the portfolio | −1.8% |
| 5% | $2,500 | −2.5% | −4.5% |
| 10% | $5,000 | −5.0% | −9.0% |
| 20% | $10,000 | −10.0% | −18.0% |
Falls of 90% have happened to large, established tokens, so the right hand column is not a thought experiment. Correlation matters as much as weight: in a sharp selloff most crypto assets drop together, so ten small altcoin positions can behave like one large one. Count them as a group when you set limits.
Core and satellite, and the alternatives
A framework is a way of turning a view into weights. Core and satellite is popular, and it is one choice among several, each with a weakness.
Core and satellite
A large core in the assets you understand best, held for years, and small satellites for higher risk ideas with a cap on each. Simple to run. The risk is satellites quietly growing into a second core.
Equal weight
The same amount in each holding, restored periodically. It forces selling winners and buying laggards, which is disciplined, and it gives a small, fragile asset the same say as a large one.
Risk weighted
Smaller weights for more volatile assets, so each holding contributes a similar amount of risk. More even in theory; it depends on volatility estimates that change fastest in a crisis.
Barbell
Mostly very low risk holdings, with a small slice in very high risk ones and little in between. The loss on the risky end is capped by its size, and the middle is given up entirely.
The stablecoin buffer
A stablecoin buffer is the part of a portfolio that is not trying to grow. It pays gas across chains, covers known expenses so nothing has to be sold at a bad moment, and supplies the cash side of a rebalance. One common way to size it is in months of expected spending, which ties it to a purpose rather than to a mood.
The buffer carries its own risks: which stablecoin, on which chain, and anywhere it earns yield. The guide to choosing a stablecoin covers backing and redemption. Keep in mind that in the US, swapping a token into a stablecoin is a disposal of that token, as the page on taxable events explains, so topping up the buffer can itself realize a gain.
Rebalancing by calendar or by bands
Rebalancing restores the targets after prices move them. There are two common triggers:
Calendar
Quarterly or yearly, whatever happened
- Simple to follow and hard to argue yourself out of
- Predictable timing for records and taxes
- Can trade when nothing much has drifted
- Can sit still through a large move between dates
Bands
Only when a weight drifts past a limit
- Trades only when drift is meaningful
- Reacts to large moves whenever they come
- Needs regular checking
- The answer depends heavily on how the band is defined
Bands are set either in absolute points (target plus or minus 5 percentage points) or relative to the target (plus or minus 25% of it). Take an illustrative $20,000 portfolio with targets of 50% BTC, 30% ETH and 20% stablecoins. BTC rises 60%, ETH rises 10%, and the portfolio is now worth $26,600:
| Holding | Target | Now | Absolute band (±5 points) | Trade to restore targets |
|---|---|---|---|---|
| BTC | 50% | $16,000 (60.2%) | Outside | Sell $2,700 |
| ETH | 30% | $6,600 (24.8%) | Outside | Buy $1,380 |
| Stablecoins | 20% | $4,000 (15.0%) | Inside, just | Add $1,320 |
With relative bands of 25%, the ranges are 37.5% to 62.5% for BTC, 22.5% to 37.5% for ETH and 15% to 25% for stablecoins, so nothing triggers yet. Same portfolio, same move, opposite answers. Pick the definition in advance, because choosing it after the move is choosing the answer.
The US tax cost of rebalancing
In the US every sale or swap is a disposal, and the gain is proceeds minus cost basis. In the example, BTC is up 60% since purchase, so the $2,700 sold had a basis of $1,687.50 and realizes a gain of $1,012.50. Held a year or less, that gain is short term and taxed as ordinary income; held more than a year, long term rates apply. At illustrative federal rates of 24% and 15%, the tax is about $243 or about $152.
That drag is why people look for ways to rebalance with fewer sales. As education, the common ones are:
- New money first. Directing $5,400 of new contributions to ETH and stablecoins would restore 50% BTC without selling anything.
- Choosing lots. Selling higher basis units realizes a smaller gain, but only with a specific identification recorded at the time of the sale (see cost basis and the cost basis calculator).
- Using losses. Realized capital losses offset gains, and beyond that up to $3,000 a year of ordinary income ($1,500 if married filing separately), with the rest carried forward.
- Wider bands. Fewer triggers mean fewer taxable events, at the cost of more drift.
The wash sale rule, which disallows a loss when the same asset is bought within 30 days before or after the sale, is written for stock and securities and, under current law as of September 2026, does not apply to crypto. A bill approved by the House Ways and Means Committee on September 16, 2026 would extend it and the constructive sale rule to digital assets. It is not law, so check its status before relying on the gap. None of this is tax advice.
Records across many wallets and chains
Since January 1, 2025, US cost basis has to be tracked wallet by wallet and account by account, under Treasury Regulation section 1.1012-1(j). The old habit of pooling every purchase across every wallet is gone. In practice:
- Each wallet or account is its own inventory. Selling from a hardware wallet draws only on the lots in that wallet.
- Without an identification, FIFO applies within that wallet or account. Specific identification has to be made by the time of the sale.
- Broker held units need the identification to reach the broker, normally. Notice 2025-7 and then Notice 2026-20 let you record it, or a standing order, in your own books instead, through December 31, 2026.
- Transfers between your own wallets move basis and holding period with the coins. Unrecorded, they look like a sale and a purchase.
- Pre 2025 basis needed allocating. Revenue Procedure 2024-28 gave a safe harbor for spreading old unused basis across wallets, generally to be completed by the first sale of that asset on or after January 1, 2025. If you never did it, raise it with a professional.
Broker forms help less than people expect. Form 1099-DA reported gross proceeds for 2025 sales, with the first forms issued in early 2026. Under the IRS instructions, brokers must report basis only for sales after 2025 of units acquired in that same account after 2025. Anything bought earlier, transferred in, or traded onchain arrives with no basis or no form at all, and the records you keep fill the gap. The forms page explains what each form misses.
Keep a wallet register
Every address and account: chain, purpose, date first used. Under the per wallet rule this list is the structure your records hang on.
Tag every transfer between your own wallets
Date, amount, both addresses. It is the entry most often missing when a reconstruction goes wrong.
Record income on arrival
Staking rewards and airdrops need their dollar value on the day received, which takes seconds then and hours later.
Export every exchange each year
A full history, saved somewhere permanent, including accounts you no longer use.
Portfolio trackers and their blind spots
A tracker that reads your addresses and exchange accounts is a good view of a portfolio and a poor ledger of it. Know where it goes wrong:
| Blind spot | What goes wrong |
|---|---|
| Liquidity and lending positions | Shown as an unpriced receipt token, or missed, and debt may not be netted |
| Staked, liquid staking and restaked tokens | Counted twice across layers, or valued at the wrong rate |
| Bridged and wrapped copies | The same asset listed twice, or priced as if it were the native token |
| Spam tokens | Worthless airdropped tokens given fake prices that inflate the total |
| Illiquid tokens | Valued at the last trade, which you could not sell into at size |
| New chains and forgotten wallets | Missing entirely until you add them |
Give trackers read only access: public addresses and read only exchange keys, never a recovery phrase and never keys that can trade or withdraw. Linking every address you own in one account also builds a map of your wealth, a tradeoff the guide to what your address says about you explores. And a tracker’s gain figure is not a tax figure: it rarely knows your lots, your identifications or the per wallet rule.
A quarterly routine
- Update the wallet register with any new address, chain or account.
- Reconcile. Check the tracker’s balances against explorers and exchange statements for your largest holdings.
- Compare weights with your bands and note any breach.
- If you rebalance, decide which lots go before you trade, record the identification, then trade.
- Export and file the quarter’s records.
- Check the floats: gas on each chain and the size of the stablecoin buffer.
Common questions
What is the per wallet cost basis rule?
From January 1, 2025, US taxpayers track cost basis separately for each wallet and each exchange account instead of one pool across everything. A sale draws on the lots in the wallet or account it came from, using FIFO unless you made a specific identification by the time of the sale. Transfers between your own wallets carry basis with them.
Does rebalancing trigger taxes in the US?
Any sale or swap you make to rebalance is a disposal, so it can realize a gain or a loss. Adding new money to underweight holdings does not, which is why some people rebalance with contributions first. Holding period, the lots chosen and any offsetting losses all change the result.
Is it better to rebalance by calendar or by bands?
Neither is better in general. Calendar rebalancing is simple and predictable; bands react to large moves and skip trades when little has changed. What matters most is choosing the rule, and the band definition, before prices move.
Does the wash sale rule apply to crypto?
Under current US law as of September 2026, no: the rule is written for stock and securities. A bill approved by the House Ways and Means Committee in September 2026 would extend it to digital assets, but it has not become law. Check the current status before relying on it.
Can a portfolio tracker replace my tax records?
No. Trackers are good at showing current balances and poor at lots, identifications, transfers between your own wallets and the per wallet rule. Use one as a view, keep your own register and exports, and review any tax report it produces before filing.
Where to go next
That is the Intermediate level, done
Every guide in this level is behind you. The Advanced level picks up exactly where this one leaves off.