Q: What makes a #crypto index meaningfully diversified when it all feels correlated?
A: Correlation in crypto tends to spike during stress events, but dispersion can be massive over full cycles. A meaningful crypto index avoids simply overweighting whatever has the largest market cap.
We look for:
Differentiated economic models or categories such as Layer 1s (L1s), Layer 2s (L2s), liquid staking, restaking, real-world assets, and decentralized exchanges (DEXs)
Sustainable token emissions
Real fee capture (revenue)
The goal isn’t necessarily to eliminate volatility. It’s avoiding a portfolio that unknowingly tracks a single narrative.
Q: Should Bitcoin still be the anchor weight in a #Diversified crypto portfolio?
A: Yes. Bitcoin is the only digital asset with commodity-like monetary properties, predictable issuance, and no venture-style dilution.
For most investors, bitcoin (BTC) serves as the risk-control asset within crypto, not the risk asset. We typically anchor portfolios with 50 to 70 percent BTC, depending on risk tolerance. From there, we build satellite positions around thematic growth.
Q: What’s a reasonable #Rebalancing schedule for a crypto model portfolio?
A: Quarterly typically works best. It’s frequent enough to capture dispersion, but not so frequent that you overtrade noise. For advisors managing through L1 Advisors, Safe, or custodial platforms, rebalance when tokens cross predefined bands (e.g., BTC deviates by 10% from target weight). The discipline removes emotion from a highly emotional asset class.
Q: Where do you see the next major shift in #Index construction?
A: I see the industry moving from asset-based indices to cash flow-based indices.
Instead of “top 10 assets by size,” we may see indices weighted by:
protocol revenue
yield efficiency
validator economics
restaking demand
RWA collateral growth
This mirrors the evolution from simple market-cap indices to smart beta in equities.
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