Hello and welcome. Today we’re building a balanced crypto portfolio the way professionals do: start with the downside, not the upside. Crypto’s had brutal drawdowns—Bitcoin down 70 percent-plus multiple times, Ethereum once down around 94 percent. Scary, yes. But small, rules-based allocations—one to five percent—have often improved a traditional portfolio’s risk-adjusted returns. The key is sizing by a rule, not by FOMO. Here’s the framework. Pick a crypto drawdown budget: the maximum dent you can tolerate in your total portfolio if crypto gets crushed. Say you can live with a 3.5 percent hit. Assume a worst-case 70 percent crypto drawdown. Target weight equals budget divided by expected drawdown. So 3.5 divided by 70 percent is a five percent crypto allocation. A seven percent budget could mean about ten percent. Cautious? Start at one percent. It’s a simple, felt-risk anchor—not a price prediction. The psychology matters. When you anchor to a loss you can stomach, you stop doom-scrolling and stop making impulsive changes. An advisor I know set five percent crypto allocations off a defined drawdown budget in early 2022. When Bitcoin fell 77 percent, their portfolio hit was under four percent—within plan. They stuck with it. That’s the win. Now maintenance: rebalancing. Use bands, not calendars. Think 20–25 percent relative bands on positions, and a five percent absolute band on your overall crypto sleeve. If Bitcoin’s target is four percent and it drifts to five (about a 25 percent relative move), rebalance. If your crypto sleeve target is five percent and it drifts to eight or down to two, rebalance. You respond to real moves and cut unnecessary trading. Inside the crypto sleeve, weight by risk, not equal dollars. Use recent volatility as your guide. If an alt runs at roughly twice Bitcoin’s volatility, give it about half the weight. Rough 90-day volatility works fine. The aim: similar risk contribution, smoother ride. Here’s the quiet edge: rules-based rebalancing can create a “rebalancing bonus” in choppy markets. Crypto often mean-reverts in the medium term. Trimming what’s run and adding to what’s lagged can add one to three percent a year in some periods—no forecasting required. In 2023, Bitcoin ripped, many alts lagged; band rebalancing took profits and redeployed into assets that later caught up. No heroics—just rules. Want one more layer? Volatility targeting. When crypto volatility spikes far above its norm, temporarily scale your crypto sleeve down. When it calms, scale back up. You’re not timing price; you’re keeping risk steadier. Now the mix: think core and satellite. Make your core boring on purpose—heavily Bitcoin and Ethereum. They have the deepest liquidity, broadest adoption, and robust narratives as digital gold and programmable money. Satellites are for views: smaller positions in layer twos, infrastructure, or selective yield strategies you truly understand. The core should be most of your sleeve; satellites scratch the curiosity itch without capsizing the ship. Use a quick decision rule: if you can’t explain in two sentences what an asset does, who uses it today, and where value accrues, it doesn’t get in. And if a satellite is two times the volatility of your core, size it at half or less. Don’t let one spicy idea dominate your risk. Protect against non-market risks. Spread custody: some on a reputable exchange for liquidity and rebalancing, some in a hardware wallet you control, and, if allowed, some in regulated products for tax-advantaged accounts. Practice strong security: unique emails, hardware security keys, allow-list withdrawals. If you pursue yield, treat counterparty risk like a position size—cap exposure and assume things can break exactly when you need them most. Be tax-aware from day one. If every sale is taxable in your region, you may prefer wider bands in taxable accounts to limit realizations. Loss harvesting can help in drawdowns—check your jurisdiction’s wash-sale rules for crypto. If you have access to tax-advantaged accounts that permit crypto via regulated vehicles, those can be a cleaner home for higher-turnover strategies. I’m not your tax advisor—plan before you trade. Automate your behavior. Set up dollar-cost averaging—weekly or monthly—into your core. Let the bands handle the rest. Pre-commit to your rules in writing: your drawdown budget, target weights, rebalance bands, and a no-go list. If you want to override the plan, sleep on it. Most mistakes happen in the heat of the moment. Automation and cooling-off periods blunt the impulse to chase. Scenario plan the big three storms. One: a giant drawdown—already embedded in your size. Two: regulatory shock or exchange failure—your custody split and allow-lists are your insurance. Keep an emergency process: where do you move assets if a venue halts withdrawals? Practice it once. Three: the upside problem. If your crypto sleeve doubles or triples, you can blow past your risk budget. Your bands and a pre-committed take-profit rule—trim anything above target by a set amount—turn paper gains into diversified gains. Build a simple health-check cadence. Monthly: quick scan—any bands breached? Is volatility materially different? Any fundamental changes to a satellite thesis? Quarterly: deeper review—does your drawdown budget still fit your life? Annually: reset targets only if your circumstances changed, not because of headlines. Let’s recap the build: 1) Define a crypto drawdown budget you can live with—three to seven percent is common; one percent if you’re dipping a toe. 2) Convert it to an allocation by dividing by a realistic worst-case drawdown, like 70 percent. 3) Set a core-satellite mix, heavy on Bitcoin and Ethereum; size satellites by their higher volatility and clarity of thesis. 4) Automate band rebalancing—roughly 20–25 percent relative bands on positions and five percent absolute on the crypto sleeve—plus a monthly check. 5) Consider volatility targeting to keep risk steadier through extremes. 6) Reduce operational risk with layered custody and strong security practices. 7) Be tax-aware and automate behavior with DCA, written rules, and cooling-off periods. 8) Scenario plan for drawdowns, venue issues, and runaway success. None of this requires perfect timing. It asks you to be specific about losses you can tolerate, systematic about maintenance, and humble about what you can’t predict. That’s how you capture upside without letting volatility run your life. A simple starting move today: write down your drawdown budget. Multiply it by roughly one over 0.7 to get your crypto allocation. Set a core split between Bitcoin and Ethereum. Add a calendar reminder to check your bands monthly. That’s it. You’ll be ahead of most investors because you’re running a process, not a vibe. As always, this is education, not personalized advice. Your situation is unique—adapt the numbers and consult professionals where it makes sense. If you take one thing from today, let it be this: start with the downside. When you control the risk, the upside has a chance to take care of itself. Thanks for listening, and I’ll catch you next time.