A fixed crypto sleeve drifts above target as ETH gains 4.75% and closes 4.24% below its 52-week high
Should a fund that holds a fixed share of its money in crypto (its crypto sleeve) sell some ETH now to return to that share, or keep the excess (the overweight) after two weeks of 30.06% and 19.74% gains?
The market facts are real; the decision maker is illustrative.
The week and the position
This matters to a fund with fixed weights: the choice sets how much of its risk sits in one volatile asset. In the week of 3 August 2020, ETH rose 4.75%, from 372.45 to 390.14, closing 4.24% below its 52-week high. The weekly range was 12.17%, and realised volatility (how much prices swung, annualised) was 67.9%. Volume was 2.18 times its prior 12-week average. Perpetual funding (a payment between long and short holders of futures with no expiry) averaged 0.0476% per eight hours. An illustrative allocator (who sets the fund's mix) keeps the sleeve at a fixed target weight; recent gains have lifted it above that weight.
Judgment
A fixed sleeve exists to set a risk budget, not to capture a trend. The sleeve's weight has risen above target, and at 67.9% realised volatility and a 12.17% weekly range that excess adds fund risk. The allocator should therefore sell back to the target weight and accept selling into strength. ETH's 4.75% weekly return is not the change in the sleeve's weight, which depends on the sleeve's size and the rest of the fund. The prior weeks' gains do not justify raising the target. Neither does positive funding, which pays derivative holders rather than this directly owned spot sleeve.
What would change it
If the fund's policy allows a stated drift band (a tolerance around the target weight before rebalancing) and the sleeve's weight is still inside it, no trade is due. A fall in ETH below its weekly open of 372.45 would shrink the excess but not necessarily remove it. The sleeve's measured weight, not ETH's price, decides.
What sets this case apart
This is rebalancing discipline for a fixed-weight sleeve after a strong run, not a forecast of ETH's direction or a trade in perpetual funding.