Position sizing, why diversification inside crypto is weaker than it looks, rebalancing, stress scenarios, and the extra duties of portfolio management.
Start with the whole picture
- Size crypto as a share of the client's total wealth and liquid assets, not in isolation.
- Match the position to the ability to bear losses from the suitability assessment.
- A small allocation to a volatile asset can still dominate a portfolio's risk.
Diversification has limits
- Most crypto-assets have tended to move together, especially in sell-offs.
- Ten tokens is not ten independent bets.
- Real diversification comes from the rest of the portfolio.
Rebalancing and stress tests
- Agree rebalancing rules in advance: calendar-based, threshold-based, or both.
- Run simple stress scenarios: a 50% fall, a stablecoin losing its peg, a custodian failure.
- Show the client the result in money, then ask if they could live with it.
Valuation for advisers
- Use consistent, documented price sources for reporting.
- Mark illiquid tokens conservatively and say how you did it.
- Separate what you know (holdings, costs) from what you assume (future prices).
Portfolio management duties
- Portfolio management is a licensed service with the same suitability duties as advice.
- Clients must receive periodic statements of the activities carried out on their behalf.
- Keep decisions within the mandate the client signed.
Key takeaways
- Size the crypto slice against total wealth and ability to bear losses.
- Crypto-assets tend to fall together. Diversify outside crypto.
- Agree rebalancing and stress scenarios before markets move.
Sources
Educational content only, not legal, tax or investment advice. Based on Regulation (EU) 2023/1114 (MiCA) and related EU texts as of September 2026. Check the official texts before relying on anything here.