Make good use of the core-satellite strategy to create a golden combination of cryptocurrency asset allocation

The Core-Satellite Strategy is a proven asset allocation method that balances risk diversification and return enhancement by dividing funds into stable "core" assets and high-potential "satellite" assets. Here's a breakdown of its application in cryptocurrency investing:

Strategy Origin: Rooted in Harry Markowitz's Modern Portfolio Theory, it combines diversification with active management, popularized by institutional investors and index funds like those by John Bogle.
Core Logic:
- Core assets (60%-90%): Low-volatility, long-term holdings like Bitcoin (BTC, 50%-60%), Ethereum (ETH, 20%-30%), and stablecoins (10%-20%) to capture market-average returns.
- Satellite assets (10%-40%): High-growth opportunities like sector-leading tokens, options, and NFT/GameFi for alpha returns.
- Dynamic balancing: Adjust proportions based on market cycles (e.g., increase core assets to 85% in bear markets, reduce satellite holdings in bull markets).
Cryptocurrency Application:
- Core assets act as a volatility buffer (BTC, ETH, stablecoins).
- Satellite assets target niche opportunities (DeFi, NFTs, etc.).
- Risk management includes position limits (single token ≤5%, sector ≤15%) and tools like DeFi staking, grid trading, and options strategies.
Key Takeaway: This strategy allows crypto investors to systematically capture market gains while pursuing higher returns through targeted allocations, optimizing risk-reward balance.

The Core-Satellite Strategy is a classic asset allocation method that achieves a balance between risk diversification and return enhancement by dividing funds into two parts: "core" and "satellite".

Strategy Origin and Development

The core-satellite strategy is based on Harry Markowitz's Modern Portfolio Theory (proposed in 1952). The theory emphasizes reducing risk through diversified investment and optimizing the portfolio return-risk ratio through asset correlation. The core-satellite strategy inherits the "mean-variance analysis" and "efficient frontier" ideas, combining the concept of diversification with active management.

This strategy was first used by institutional investors (such as pension funds and family offices) in the 1990s, and was later popularized by John Bogle, the father of index funds, who promoted low-cost index investment. With the development of tools such as ETFs, the strategy has gradually become the standard allocation method of mainstream asset management institutions around the world.

Strategy core logic

The asset division principle of this strategy is core assets + satellite assets:

Core assets (60%-90% of funds): mainly low-volatility, long-term stable assets, such as broad-based indexes (SSE 300, S&P 500), bonds or high-dividend funds. The goal is to obtain the market average return (β return).

Satellite assets (10%-40% of funds): Allocate highly elastic assets such as industry-themed ETFs (chips, new energy), growth stocks or alternative investments (commodities, REITs), aiming to capture excess returns (alpha returns).

At the same time, the assets maintain a dynamic balance mechanism, which is not static. The proportion is adjusted regularly (such as once a year) to maintain the risk level; satellite assets are switched by market cycles (for example, cyclical stocks are added during economic recovery, and defensive sectors are switched during recession).

Currently, international institutions such as Vanguard, Barclays Global Investors, UBS, and Bridgewater Associates have all adopted the core-satellite concept to hedge risks through multiple assets.

Application of strategies in the cryptocurrency world

According to the latest practice in the cryptocurrency circle in 2025, combined with the underlying logic of the core-satellite strategy and the characteristics of the crypto market, the asset allocation plan can be broken down into the following structure:

Core asset allocation (70%-80%): Ballast against volatility

1. Bitcoin (BTC) dominance (50%-60%)

2. Ethereum (ETH) ecological value (20%-30%)

3. Stablecoin liquidity buffer (10%-20%)

Satellite asset layout (20%-30%): Capturing Alpha opportunities

1. Track leader token

2. Option investment tools

3. NFT/GameFi appreciation

Dynamic balance mechanism

Adjust according to the bull-bear cycle. In a bear market, core assets are increased to 85% (BTC 60% + ETH 25%), and satellite positions only retain low-volatility assets such as DeFi staking. In a bull market, a three-stage profit-taking method is used (reducing holdings by 10% when breaking through the previous high, reducing holdings by 30% during market frenzy, and clearing satellite assets during the bubble period).

Risk Management Framework

1. Position control

Single token position ≤5%, track concentration ≤15%; use hardware wallets to store more than 50% of core assets, and the exchange only retains the funds required for operations.

2. Yield Enhancement Tools

• DeFi arbitrage: Participate in the USDe staking of the Ethena protocol and obtain a 5% annualized return through a Delta neutral strategy.

• Quantitative assistance: Use grid robots to capture profits from volatile market conditions.

• Option grid: Profit by buying low and selling high through sell put + sell call.

In short, through the strategy of "keeping the core and being innovative with the satellites", cryptocurrency investors can not only seize the systematic opportunities in the crypto market, but also obtain excess returns through track segmentation, thus achieving the optimal balance between risk and return.