The Core-Satellite Strategy is a classic asset allocation method that divides capital into 'core' and 'satellite' parts to achieve a balance between risk diversification and return enhancement.

Origin and development of the strategy

The theoretical foundation of the Core-Satellite Strategy stems from Harry Markowitz's Modern Portfolio Theory (proposed in 1952). This theory emphasizes reducing risk through diversification and optimizing the return-risk ratio through asset correlation. The Core-Satellite Strategy inherits the ideas of 'Mean-Variance Analysis' and 'Efficient Frontier', combining the concept of diversification with active management.

This strategy was first applied by institutional investors (such as pension funds, family offices) in the 1990s and became popular later due to the promotion of low-cost index investing by John Bogle, the father of index funds. With the development of tools like ETFs, the strategy gradually became the standard configuration method for global mainstream asset management institutions.

Core logic of the strategy

The asset allocation principle of this strategy: core assets + satellite assets:

Core assets (60%-90% of funds): Mainly low-volatility, long-term stable assets, such as broad-based indices (CSI 300, S&P 500), bonds or high-dividend funds. The goal is to obtain market average returns (β returns).

Satellite assets (10%-40% of funds): Allocate high-elasticity assets, such as industry-themed ETFs (chips, new energy), growth stocks or alternative investments (commodities, REITs), aimed at capturing excess returns (α returns).

At the same time, the assets maintain a dynamic balance mechanism and are not static. Regular adjustments (such as once a year) are made to maintain risk levels; satellite assets are switched according to market cycle rotation (e.g., increasing cyclical stocks during economic recovery, shifting to defensive sectors during recession).

Currently, international institutions such as Vanguard, Barclays Global Investors, UBS, and Bridgewater Associates have adopted the core-satellite concept to hedge risks through multi-asset strategies.

Application of the strategy in the cryptocurrency space

According to the latest practices in the cryptocurrency space for 2025, combined with the underlying logic of the core-satellite strategy and the characteristics of the crypto market, the asset allocation plan can be broken down into the following structure:

Core Asset Allocation (70%-80%): Anti-volatility ballast

1. Bitcoin (BTC) dominance (50%-60%)
2. Ethereum (ETH) ecological value (20%-30%)
3. Stablecoin liquidity buffer (10%-20%)

Satellite Asset Allocation (20%-30%): Capturing Alpha Opportunities

1. Leading tokens in the track
2. Options investment tools
3. NFT/GameFi appreciation

Dynamic Balance Mechanism

Adjustments based on bull and bear cycles. In a bear market, core assets are increased to 85% (BTC 60% + ETH 25%), and satellite positions only retain low-volatility assets such as DeFi staking. In a bull market, a three-stage profit-taking method (reduce 10% when breaking previous highs, reduce 30% during market frenzy, liquidate satellite assets during bubble periods).

Risk Management Framework

1. Position control
Single token position ≤ 5%, track concentration ≤ 15%; use hardware wallets to store over 50% of core assets, only keeping the funds needed for trading in exchanges.

2. Return enhancement tools
• DeFi arbitrage: Participate in USDe staking of the Ethena protocol to obtain a 5% annualized return through a delta-neutral strategy.
• Quantitative assistance: Use grid robots to capture profits in volatile markets.
• Options grid: Profit through sell put + sell call low buy high sell.

In summary, through the strategy of 'Core Stability and Satellite Innovation', cryptocurrency investors can seize systematic opportunities in the crypto market while obtaining excess returns through track segmentation, achieving an optimal balance of risk and return.