Calendar vs threshold rebalancing
Calendar rebalancing means you trade back to target on a fixed date: every month, quarter or year, whatever the market did. It is easy to stick to and easy to automate as a reminder, but it can trade when drift is tiny (paying fees for nothing) and ignore big swings between dates.
Threshold (band) rebalancing means you only trade when an asset moves outside a band around its target, such as ±5 percentage points. It reacts to large moves and stays quiet otherwise. Crypto is volatile, so a band that is too tight can trigger trades very often; wider bands trade less. Many investors check on a calendar and trade only if the band is breached — that is what the result box above tells you.
Worked example
A hypothetical $10,000 portfolio targets 50% BTC, 25% ETH and 25% USDC. After a Bitcoin rally it holds BTC $6,500, ETH $2,300 and USDC $2,200 — $11,000 in total. The weights are now 59.1% / 20.9% / 20.0%, so BTC is 9.1 points over target and outside a ±5 point band.
- Full rebalance: targets are $5,500 / $2,750 / $2,750, so sell $1,000 of BTC, buy $450 of ETH and buy $550 of USDC.
- Buy-only with $1,000 of new cash: the new total is $12,000. ETH is $700 below its $3,000 target and USDC $800 below, so the cash is split in that 7:8 ratio — about $467 to ETH and $533 to USDC. Nothing is sold, and every asset ends inside the band (54.2% / 23.1% / 22.8%).
Click “Load worked example” above to see the same numbers in the calculator.
Costs and taxes
Every trade costs something: exchange fees, the spread between buy and sell prices, and sometimes network fees to move coins. A minimum trade size stops you paying those costs on tiny adjustments.
Selling, or swapping one coin for another, may create a taxable gain. In the US the IRS treats crypto as property, so each sale is generally a disposal. Buy-only rebalancing with new money avoids selling. Rules vary by country and personal situation; this is general information, not tax advice.
Related: portfolio rebalancing guide · crypto tax basics · DCA planner · tax calculator