Risk Parity in Crypto: Sizing by Volatility

Most people split money equally across coins. The problem: a wild coin then dominates your risk. Risk parity fixes this by giving each position a similar risk budget, not a similar dollar amount.

The core idea

Instead of equal dollars, you put more money in calmer (low-volatility) assets and less in wild ones, so no single coin drives the whole portfolio's ups and downs. The result is usually a smoother ride.

Why it helps

• Lower overall portfolio volatility.
• Smaller drawdowns than naive equal weighting.
• No single coin can wreck your month.

The trade-off

In a screaming bull run, concentrating in the hottest coin would beat risk parity. Risk parity trades some upside for a lot more stability — a deal many investors prefer.

Test it free

HeroQuant includes a risk-parity strategy that holds low-volatility coins above the trend filter, inverse-volatility weighted. Compare it against momentum and buy-and-hold — no code.