A fifth up week at the 52-week high forces a fixed sleeve back to target
Should the allocator trim the crypto sleeve back to its fixed weight after a fifth consecutive up week, or let the drift ride given the strength of the rally?
The market facts are real; the decision maker is illustrative.
The week and the position
In the week of 20 May 2019, BTC rose 5.73% to close at 8,614.43, having been at its 52-week high (0.0% below it). The four prior weeks were all up, returning 0.95%, 8.77%, 20.68% and 16.94%. Realised annualised volatility was 67.8%, the weekly range 17.14%, and the largest one-hour move 6.13% late in the UTC day on Sunday. Volume ran 2.06 times its prior 12-week average, and the return sat at the 80th percentile of 66 weeks of history. ETH lagged BTC by 3.77 percentage points.
Judgment
The sleeve's weight has drifted well above target after four up weeks and a fifth, and its risk budget is defined in weight, not in conviction. Trim back to the fixed weight this week and do it on the strength of the rally, since volume was 2.06 times the 12-week average and price closed in the upper third of its range, which offers liquidity rather than distress. Accept that the fund gives up further gains if the run continues; the accepted loss is the sleeve's return above target weight, not a forced exit from crypto.
What would change it
If the fund's mandate defines the sleeve as a minimum rather than a target weight, the drift is allowed and the trim is wrong. If realised volatility falls materially below 67.8% for several weeks while price holds above the week's open of 8,147.94, the trim can be smaller.
What sets this case apart
The decision is a rebalancing rule meeting a fifth consecutive up week at a 52-week high, not a view on where BTC goes next.