Asensio scored three goals in his first start of the season against former club Mallorca as Madrid returned to the league summit at the Santiago Bernabeau.
After Karim Benzema opened the scoring in the third minute, Asensio took centre stage – the Spaniard scored on either side of Lee Kang-in's goal to give Madrid a 3-1 half-time lead.
Asensio completed his treble 10 minutes into the second half as he became the sixth Spanish player to score a hat-trick for Madrid in LaLiga this century and the first since Alvaro Morata in April 2017.
Benzema and Isco added gloss to the scoreline, though Ancelotti heaped praise on Asensio post-match.
"I invest my experience in the team and look to give them my all, both in terms of experience and confidence," Ancelotti told reporters, with Madrid now boasting 16 points from their opening six league matches – their best start to a season at this stage since 2013-14, when the Italian boss was last in charge.
"I'm lucky to coach this brave team with a lot of quality and players who learn quickly. Asensio played very well. We knew that he can do a lot of damage and they had a lot of quality between the lines, he's a very good shot taker and he combines very well.
"Asensio has performed very well and during next week he can hopefully score three goals as well. I think this is the position.
"It can be sometimes that if we push with the full-back, defending, he can play more on the outside, but with the ball it's always the same position because he likes it. When he comes inside he has the ball on the left and he is very dangerous there."
Benzema also impressed in the Spanish capital – the in-form France international has been directly involved in 15 goals in LaLiga this season (eight goals and seven assists).
It is the best start in goal involvement of any player after the first six league games of the campaign in the 21st century.
"Karim is doing well," Ancelotti said. "He's scored eight goals and can make you forget that he is playing very well with the team, he gets behind, he contributes to the other players.
"He's a striker who doesn't just score goals. He is complete in every way.
"The day when he needs a rest weell play [Luka] Jovic, who has been doing really well. Jovic is up against really tough competition, but when he's played he's done well.
"He had two chances today and he also played extremely well against Valencia. He'll play when Benzema isn't available."