Diversifying Your Crypto Portfolio: How Automated Indices Change the Game

Most crypto portfolios rely on one or two assets. Diversification does not eliminate risk, but it reduces some of it. It also requires a discipline of weighting and rebalancing that few investors maintain over time. Automated indices now allow for delegation without entrusting your funds.

Concentration as the Default Setting

People rarely enter crypto with an allocation plan. They buy Bitcoin, then a bit of Ether, sometimes a trendy asset.

The market itself pushes in this direction. As of October 16, 2026, Bitcoin accounted for nearly 58% of a total crypto market capitalization of about $2.86 trillion (CoinGecko).

What Diversification Brings and What It Does Not

Since Markowitz (1952), we know that the risk of a portfolio is not simply the average of the risks of its components: it also depends on the correlations between them. Combining assets that do not move together reduces overall volatility.

The nuance is important. Diversification reduces specific risk, that of a project failing, a protocol being hacked, or a token losing its liquidity. It does not reduce market risk. In a crash, correlations between crypto assets rise sharply: almost everything falls at the same time. Holding ten cryptos instead of two offers little protection.

To truly reduce the risk of the whole, one must step outside of crypto: gold, major stock indices, or certain tech stocks do not always follow the same cycle.

Weighting is an Often Overlooked Issue

Choosing assets is only half the job. One must then decide their weight. Three approaches dominate.

• By Market Capitalization: each asset weighs according to its market size. In crypto, this produces a near-Bitcoin index. The Nasdaq CME Crypto Index, weighted by floating capitalization without a cap, had 78.67% Bitcoin as of June 30, 2026.
• Equal Shares: each asset receives the same weight. The rule is simple, but it gives as much space to smaller, more volatile assets as to larger ones.
• With a Cap: starting from market capitalization, but limiting the weight of each line. The CoinDesk 20 caps its first asset at 30% and others at 20%, with quarterly rebalancing.

Academic research encourages humility in the face of sophisticated models. DeMiguel, Garlappi, and Uppal (2009, Review of Financial Studies) showed that none of the 14 optimization models tested on 7 datasets consistently outperformed the naive rule 1/N. Plyakha, Uppal, and Vilkov (EDHEC, 2012) observed that, over four decades of U.S. stocks, an equally weighted portfolio rebalanced monthly outperformed market-cap weighting in returns and Sharpe ratio, albeit with higher risk.

These studies focus on stocks, not crypto. They merely remind us that a simple rule, applied rigorously, often beats fragile optimization.

Then there is rebalancing. Without it, the asset that rises takes up more and more space, and the chosen allocation disappears. Rebalancing means selling part of what has risen to buy what has fallen.

What Has Changed: Rebalanced Indices on Your Own Account

A third way now exists, between manual management and products that hold your funds: baskets of assets automatically rebalanced, directly on the user's account.

This is what Constellation, developed by Neutralis, offers. The indices are rebalanced every month on the client's Hyperliquid account. The operation is non-custodial: Neutralis can place orders but can never withdraw or transfer funds, and access can be revoked at any time. Exposure is through perpetual contracts, allowing non-crypto assets (gold, S&P 500, stocks) to be placed in the same basket as Bitcoin.

Three indices illustrate three ways to spread risk.

• Ursa Major (macro diversified, moderate risk) mixes crypto and traditional assets: Bitcoin 25%, S&P 500 20%, Gold 18%, Ethereum 12%, US Tech 100 10%, Solana 8%, Silver 7%.
• Orion (crypto blue chips, high risk) stays within crypto: Bitcoin 40%, Ethereum 25%, Solana 15%, Hyperliquid 12%, XRP 8%.
• Lyra (AI and disruptive technologies, speculative profile) combines Nvidia, Palantir, Coinbase, Nebius, a memory ETF, and cryptos like Bitcoin, Solana, Hyperliquid, Ethereum, and Sui, with weights between 5% and 15%.

These target weights can evolve without notice, but the goal of each index remains the same.

For those with their own convictions, Nova allows for the construction of a custom index: from 2 to 10 assets among those available, with free weights and monthly or weekly rebalancing.

In practice, a minimum of 500 USDC is required, and the entire USDC balance of the wallet is allocated to the index. Fees are 10% on gains only, with no subscription. You can stop at any time, without fees or commitment duration.

Limitations to Keep in Mind

Automating a strategy does not make it risk-free. Crypto assets remain highly volatile, and losses can reach the total capital. Perpetual contracts are derivatives, with their own risks. Past performance does not predict future performance.

Diversification also has its limits. In a crash, a basket composed solely of cryptos will likely drop almost as a whole. An index of five assets with 40% Bitcoin remains heavily exposed to Bitcoin.

Conclusion

Diversifying does not eliminate risk: it is about choosing which risks to accept. What has changed is that execution can now be delegated without entrusting funds. To see how these baskets are constructed, the Constellation page details the composition of each index and the access conditions.

This article is educational and does not constitute investment advice.