Lesson 5 of 5

Smart cash allocation: give profits and cash a plan

Seeing a portfolio rise in value is different from realising a gain. While you still hold an investment, its profit is unrealised: a market reversal can reduce it or erase it. Without a plan for when to sell, an investor can watch substantial paper profits come and go without ever taking any of them off the table.

A plan can help you decide in advance how much to keep invested and how much to move into cash. It can also define when to deploy that cash again, instead of leaving every decision to the emotion of the moment.

Rebalio’s smart cash allocation, called dynamic cash allocation in the app, connects your portfolio’s value relative to a reference amount with a cash target. As that value rises, the cash target increases. As it falls, the target decreases. The other allocation targets adjust proportionally to make room.

This provides a framework for gradually taking profits on the way up and deploying cash on the way down across market cycles. It does not identify a market top or bottom, guarantee profits, or protect you from further losses.

What “cash” means here

Cash is the portfolio’s execution currency held on the exchange, such as USD or USDT. It is included in managed portfolio value. Excluded holdings are not included in that value or in the dynamic allocation calculation.

Cash is not automatically transferred to your bank account or set aside for taxes. A stablecoin is still a crypto asset with issuer, depegging, and other risks. This trading allocation is separate from the emergency fund discussed in lesson 2.

Start with the performance configuration

In your portfolio’s performance configuration, set a positive Reference amount in the portfolio’s execution currency. Enable dynamic cash allocation, then choose four values:

The minimum return must be lower than the maximum return. Cash targets must be between 0% and 100%, and the lower cash target cannot exceed the higher one. These are your strategy choices, not predictions of how far the market will move.

Choose a reference amount with a clear purpose

The reference is a fixed comparison baseline. It stays the same until you edit it; it does not automatically follow your portfolio, track net deposits, or reset after a profitable sale.

There are two useful ways to think about it:

• Net deposits or contributed capital. You might use the amount contributed to the managed portfolio, less withdrawals, as your comparison baseline. Keep your own records and review the reference after money moves in or out. Rebalio does not maintain this number automatically.
• A target amount. You might choose a financial objective, such as 100,000 USDT. A portfolio worth 80,000 USDT is then 20% below that target. That does not mean the investments have lost 20%: the target is an objective, not necessarily the amount you invested.

Use a baseline that relates to the same managed holdings and currency as the portfolio. Including capital belonging to excluded assets would distort the comparison. If your chosen net-deposit baseline becomes zero or negative after withdrawals, you need another positive reference before using this calculation.

For example, a portfolio worth 60,000 USDT is 20% above a 50,000 USDT reference, but 40% below a 100,000 USDT target. The assets have not changed; the meaning of the baseline has. Choose it deliberately rather than changing it whenever you dislike the signal.

Understand “return versus reference”

The Performance view shows Managed value, Reference amount, Return versus reference, and the effective Dynamic cash target.

The calculation is:

With managed value of 55,000 USDT and a reference of 50,000 USDT:

This is the portfolio return signal used by the cash rule. It is not a time-weighted return, a money-weighted return, or a tax calculation. It does not separate market performance from deposits and withdrawals.

Suppose a portfolio is worth 50,000 USDT against a 50,000 reference. Depositing another 5,000 USDT makes the signal +10%, even if no investment price changes. A withdrawal can push the signal down for the same reason. If you use net deposits as your baseline, review and update it when contributions or withdrawals change it. Review the cash rule too: editing the reference immediately changes what its endpoints mean.

Map that return to a cash target

Consider an illustrative configuration, not a recommended investment strategy:

• Reference amount: 50,000 USDT.
• Minimum return: −20%, with 5% cash.
• Maximum return: +30%, with 25% cash.

Between those endpoints, the cash target moves in a straight line. Below the minimum return it stays at 5%; above the maximum it stays at 25%.

At +10%, the signal is 30 percentage points above the lower endpoint, across a total range of 50 percentage points. It is therefore 60% of the way along the rule:

At 55,000 USDT, a 17% target corresponds to 9,350 USDT of cash. That is a target balance, not an instruction to sell 9,350 USDT. Existing cash and asset weights matter when Rebalio calculates any trades.

How the rest of your allocation adjusts

Increasing cash leaves less of the portfolio for other holdings. Rebalio scales the saved noncash weights proportionally, preserving their relative mix. Your saved base allocation stays intact.

Suppose your base allocation is 60% BTC, 30% ETH, and 10% cash. The noncash split is two parts BTC to one part ETH.

At 25% cash, the remaining 75% is divided in that same 2:1 ratio: 50% BTC and 25% ETH. Smart cash changes overall exposure; it does not decide that BTC is preferable to ETH or change your relative convictions between them. If dynamic cash is disabled, Rebalio uses the saved base allocation again.

From targets to actual trades

A new target is not a completed transaction. Saving settings or refreshing balances does not itself realise a gain or deploy cash.

During an approved rebalance, Rebalio calculates effective targets before checking the noncash holdings against their allocation ranges. Holdings outside their permitted ranges can be corrected with approved orders. Most connections use market orders; Hyperliquid uses bounded immediate-or-cancel limit orders. Sells happen before buys. Rebalancing requires your explicit approval.

Cash is the balance remaining after those corrections. Its target is not a separate trading trigger or a guaranteed minimum reserve. If the noncash holdings remain within their ranges, the cash percentage can differ from the displayed target without causing a trade. Fees, price changes, available balances, exchange minimums, and incomplete fills can also leave a difference.

This strategy does not place a ladder of resting orders. It works through the rebalances you explicitly preview and approve. See lesson 4 for allocation ranges and execution.

Planning around market cycles

On a rising path, a higher cash target reduces the effective targets of the other holdings. When rebalancing requires sales, some exposure moves into cash. If the investments sold have appreciated relative to their acquisition costs, those sales can realise part of the gains instead of leaving all of them exposed to the next decline.

On a falling path, a lower cash target increases the effective targets of the other holdings. Rebalancing may use available cash to buy more, spreading deployment across successive runs rather than requiring one decision to invest everything at once.

“Gradually” describes how the target changes along your chosen range. It does not guarantee equal-sized trades or a fixed number of purchases. A large move between rebalances can produce a large target change, and there may be no trade when allocation ranges are not breached.

The tradeoffs matter. Selling during a rally can leave you behind a buy-and-hold portfolio if prices keep rising. Buying during a decline increases exposure to assets that may continue falling or never recover. Once the minimum cash target is reached, the rule stops lowering that target; it does not provide unlimited new buying power. A cash percentage floor is also not a fixed amount of money.

The aim is a repeatable plan for changing exposure, not a promise to outperform or capture every market cycle.

Taking profits and taxes

Taking profit through a sale is generally a taxable disposal. Tax treatment depends on your jurisdiction, tax residency, account structure, and the asset. Selling or exchanging an investment can create a reportable gain or loss even when the proceeds stay on an exchange or are converted into a stablecoin.

For example, the Australian Taxation Office explains that selling or exchanging crypto can have capital gains tax consequences. Rules in other countries may differ.

Sale proceeds are not the same as profit. A positive return-versus-reference signal does not prove that every asset sold has a taxable gain, and a target-based reference is not a tax cost basis. Rebalio’s cash calculation does not select tax lots, calculate tax owed, or reserve money for a tax bill.

Before enabling regular profit-taking, discuss the plan with a qualified tax accountant or registered tax agent and, where appropriate, your financial adviser. Keep records of purchases, sales, swaps, and fees, and plan separately for any tax payment. Cash that is later redeployed by the strategy may no longer be available when taxes are due.

Put the plan in writing

Before starting, record the purpose of your reference amount, both return endpoints, both cash targets, and the relative asset mix you want to retain. Check what the rule does below, between, and above its endpoints. Decide how deposits, withdrawals, and excluded holdings will affect your baseline.

Review the effective targets before authorizing a rebalance. Revisit the plan when your circumstances or objectives change, rather than treating every market move as a reason to rewrite it.

Unrealised profits become realised gains only when a profitable position is disposed of. Smart cash allocation gives you a way to plan those decisions—and the deployment of available cash—before market excitement or fear takes over. The choices, risks, and tax consequences remain yours.

This lesson is educational. The numbers illustrate the calculation, not a recommended allocation or a forecast. Investing involves risk, including loss of principal. Consult an appropriately qualified adviser about your circumstances.