Portfolio Rebalancing¶

Diversify your collateral without closing positions or triggering taxable events.

The Strategy¶

Rebalance your collateral mix while maintaining active positions on STRATO.

Why rebalance:

Reduce concentration risk (too much in one asset)
Optimize for better loan terms
Adjust to market conditions
Improve health factor/collateralization ratio

Key benefit: Keep your positions active, no need to exit and re-enter

Complete Example: ETHST → Multi-Asset Portfolio¶

Your starting position:

Collateral: 10 ETHST ($30,000) - 100% ETHST exposure
Debt: 10,000 USDST borrowed
Health Factor: 2.4
Risk: High correlation to ETHST price

Your goal:

Diversify to: 70% ETHST, 20% WBTCST, 10% stablecoins
Maintain same debt
Improve risk profile
Keep positions open

Time needed: 20 minutes
Cost: ~$0.60 in gas + swap fees

Step-by-Step Implementation¶

Step 1: Assess Current Position (2 min)¶

Check your metrics:

Go to Borrow (in sidebar)
Review:
Collateral: 10 ETHST ($30,000)
Debt: 10,000 USDST
Health Factor: 2.4
Max borrow: $18,000 (75% LTV)

Calculate room to maneuver:

Current borrowing: $10,000
Maximum safe borrowing: $18,000 (at HF 1.5)
Available room: $8,000

Safe to proceed: Yes, HF is very healthy

Step 2: Decide Target Allocation (3 min)¶

Target portfolio:

ETH: 70% = $21,000 = 7 ETHST
BTC: 20% = $6,000 = 0.12 WBTCST (at $50k/BTC)
Stablecoins: 10% = $3,000 = 3,000 USDST

What needs to change:

Current:

- ETHST: 10 ($30k)
- WBTCST: 0
- USDST: 0

Target:

- ETHST: 7 ($21k)
- WBTCST: 0.12 ($6k)
- USDST: 3,000 ($3k)

Action needed:

- Withdraw: 3 ETHST
- Swap: 3 ETHST → 0.12 WBTCST + 3k USDST
- Supply: WBTCST + USDST as collateral

Step 3: Withdraw ETHST (2 min)¶

Withdraw some ETHST to rebalance:

Go to Borrow (in sidebar)
In Collateral Management table, find ETHST → Click "Withdraw"
Enter amount: 3.0
Check impact:
New collateral: 7 ETHST ($21,000)
Health Factor: 1.68 ✅ (still safe)
Click "Withdraw" (~$0.10 gas)

Result:

✅ Collateral: 7 ETHST ($21,000)
✅ Debt: 10,000 USDST (unchanged)
✅ Health Factor: 1.68 (safe)
✅ Wallet: +3 ETHST ```

---

### Step 4: Swap ETHST → WBTCST (3 min)

**Convert ETHST to BTC:**

1. Go to **Swap Assets**
2. From: **ETH** → Amount: **2.0**
3. To: **WBTCST**
4. Review:

   - Receive: ~0.12 WBTCST (after 0.3% fee)
   - Value: ~$6,000
   - Price impact: < 1%
5. Click **"Swap"** (~$0.10 gas)

**Result:**

✅ Wallet: +0.12 WBTCST ($6,000) ✅ Remaining: 1 ETHST

---

### Step 5: Swap ETHST → USDST (3 min)

**Convert remaining ETHST to USDST:**

1. Go to **Swap Assets**
2. From: **ETHST** → Amount: **1.0**
3. To: **USDST**
4. Review:

   - Receive: ~$2,991 USDST (after 0.3% fee)
   - Price impact: < 1%
5. Click **"Swap"** (~$0.10 gas)

**Result:**

✅ Wallet: +2,991 USDST ✅ Ready to supply as collateral

---

### Step 6: Supply New Collateral (4 min)

**Add WBTCST collateral:**

1. Go to **Borrow** (in sidebar)
2. In Collateral Management table, find **WBTCST** → Click **"Supply"**
3. Enter amount: **0.12**
4. Click **"Supply"** (~$0.10 gas, approval automatic)

**Add USDST collateral:**

1. In Collateral Management table, find **USDST** → Click **"Supply"**
2. Enter amount: **2,991**
3. Click **"Supply"** (~$0.10 gas, approval automatic)

**Result:**

✅ New collateral composition:

7 ETHST ($21,000) = 70%
0.12 WBTCST ($6,000) = 20%
2,991 USDST ($3,000) = 10% Total: $30,000 (same value)

✅ Total debt: 10,000 USDST (unchanged) ✅ Health Factor: 2.4 ✅

---

## Your Rebalanced Position

### Before Rebalancing

Collateral: 10 ETHST ($30k) Debt: 10,000 USDST HF: 2.4 Risk: 100% correlated to ETHST ```

After Rebalancing¶

Collateral:

- 7 ETHST ($21k) = 70%
- 0.12 WBTCST ($6k) = 20%
- 2,991 USDST ($3k) = 10%
Total: $30,000

Debt: 10,000 USDST (unchanged)
HF: 2.4
Risk: Diversified across 3 assets

Risk Analysis¶

Risk Reduction¶

Before:

ETHST drops 20% → Collateral = $24k → HF = 1.92 (moderate)
Single point of failure

After:

ETHST drops 20% → Only affects 70% of collateral
WBTCST, USDST unaffected (or inverse correlation)
Collateral = $26.8k ($21k→$16.8k ETHST, $6k WBTCST, $3k USDST)
HF = 2.14 (safe)

Improvement: ~11% better HF in ETHST crash scenario

Trade-offs¶

Pros ✅:

Lower concentration risk
Better stability in ETHST crashes
USDST portion is uncorrelated
Easier to manage volatility
Same HF maintained (2.4)
No additional debt or interest costs

Cons ❌:

More assets to monitor
Swap fees (~$0.60)
Slightly less ETHST exposure (if ETHST pumps)

Alternative Rebalancing Strategies¶

Strategy 1: More Aggressive Rebalancing¶

For even more diversification:

Withdraw 5 ETHST (not 3)
Target: 50% ETHST, 30% WBTCST, 20% USDST
Swap 5 ETHST → 0.2 WBTCST + 6k USDST

Result:

Collateral: $30k (5 ETHST, 0.2 WBTCST, 6k USDST)
Debt: $10k (unchanged)
HF: 2.4 (same safety)
More diversification

Strategy 2: Gradual Rebalancing¶

Spread over multiple days:

Day 1: Swap 25% of target
Day 2: Another 25%
Continue over 1 week
Less price impact
Can adjust if market moves

Strategy 3: Opportunistic Rebalancing¶

Wait for optimal conditions:

When ETHST pumps: Sell high
When WBTCST dips: Buy low
Use limit orders (if available)
Maximize rebalancing profit

Cost Breakdown¶

Action	Cost
Withdraw 3 ETHST	$0.10
Swap 2 ETHST → WBTCST	$18 (0.3% of $6k)
Swap 1 ETHST → USDST	$9 (0.3% of $3k)
Supply WBTCST collateral	$0.10
Supply USDST collateral	$0.10
Total	~$27.40

No additional debt costs:

Debt unchanged at $10k
No additional interest
Only one-time swap fees

Monitoring Your Rebalanced Portfolio¶

Daily Checks¶

Track all assets:

ETHST price movements
WBTCST price movements
USDST stays at $1
Combined Health Factor

Set alerts:

HF drops below 1.5 → Add collateral
ETH/BTC ratio changes significantly → Consider rebalancing again

When to Rebalance Again¶

Trigger events:

One asset grows to >60% of portfolio
Health factor deteriorates
Better opportunities emerge
Risk tolerance changes

Recommended frequency:

Review: Weekly
Rebalance: Quarterly or when >10% drift

Advanced: Weighted by Volatility¶

Optimal allocation based on risk:

Asset volatilities:

ETH: ~70% annual volatility
BTC: ~60% annual volatility
USDST: ~0% volatility

Risk-weighted allocation:

USDST: 40% (stable, high weight)
BTC: 35% (moderate volatility)
ETH: 25% (high volatility, lower weight)

Result: Lower overall portfolio volatility

Tax Considerations¶

Rebalancing creates taxable events:

Swapping tokens = selling + buying
Capital gains/losses realized
Track cost basis for each asset
Consult tax professional

Tax-efficient approach:

Rebalance in tax-advantaged accounts (if possible)
Harvest losses to offset gains
Consider holding periods

Real Example: 30-Day Results¶

Starting position:

10 ETHST collateral
10k USDST debt
HF: 2.4

After rebalancing:

7 ETHST + 0.12 WBTCST + 3k USDST
10k USDST debt (unchanged)
HF: 2.4

Market moves over 30 days:

ETH: -15% (crash)
BTC: +5% (resilient)
USDST: $1 (stable)

Result comparison:

Scenario	Old Portfolio	New Portfolio
Collateral value	$25,500	$26,700
Health Factor	1.53	1.60
Loss	-$4,500	-$3,300

Saved: $1,200 due to diversification ✅

Troubleshooting¶

"Can't withdraw ETHST - HF too low"¶

Problem: Trying to withdraw before adding other collateral

Fix:

Add WBTCST and USDST first
Then withdraw ETHST 3. Order matters!

"Insufficient USDST for swaps"¶

Problem: Didn't borrow enough

Fix:

Calculate total needed first
Borrow with buffer (extra 5-10%)
Can always repay excess

"Swaps have high price impact"¶

Problem: Pools don't have enough liquidity

Fix:

Split into smaller swaps
Wait for more liquidity
Use different pairs/routes

Best Practices¶

DO ✅¶

Calculate target allocation before starting
Add new collateral before withdrawing old
Monitor HF after each step
Keep safety buffer in debt capacity
Document cost basis for taxes

DON'T ❌¶

Withdraw collateral first (risky)
Over-leverage with new debt
Rebalance too frequently (costs add up)
Ignore tax implications
Forget to monitor new assets

Next Steps¶

Further Optimization¶

Risk Management - Hedge your diversified portfolio
Multi-Asset Strategy - Advanced multi-collateral approaches
Collateral Optimization - Dynamic rebalancing

Learn More¶

Safety Guide - Managing diversified positions
Swap Guide - Deep dive on token swaps
Lending Guide - Collateral management

Need Help?¶

Support: support.blockapps.net
Telegram: t.me/strato_net
Docs: docs.strato.nexus