Don’t worry I’m not starting a yoga blog I’m actually just “click-baiting” you into discovering “re-balancing”.
UPDATE March 16, 2019.
After one month of rebalancing on Shrimpy I made a 22.75 % profit
UPDATE April 02, 2019.
Since feb 16, rebalancing on Shrimpy returned a 41.53 % profit
1. What’s rebalancing?
According to Investopedia:
Rebalancing is the process of realigning the weightings of a portfolio of assets. Rebalancing involves periodically buying or selling assets in a portfolio to maintain an original desired level of asset allocation.
Let’s say your initial cryptocurrency portfolio is $1000 divided over 3 coins
- 50% of the value is in BTC or $500
- 25% of the value is in ETH or $250
- 25% of the value is in NEO or $250
Say NEO increases to $600 in value. Meanwhile, your BTC went down to a value of $360 and ETH to a value of $240.
Your portfolio is now worth $1200:
- 30% of the value is in BTC or $360
- 20% of the value is in ETH or $240
- 50% of the value is in NEO or $600
As you can see the initial percentages in your portfolio are now different. Rebalancing will now restore the initial percentages but based on the new total of $1200.
Let’s just calculate the required percentages.
- 50% of $1200 = $600
- 25% of 1200 = $300
The re-balancer will now buy:
- $240 worth of extra BTC (or $600-$360)
- $60 worth of extra ETH (or $300-$240)
- $300 worth of NEO (or -$300 + $600)
Your new balance will look like this.
- 50% of the value is in BTC or $600
- 25% of the value is in ETH or $300
- 25% of the value is in NEO or $300
So you basically rebalancing will sell your profit and use it to buy more of the coins that have dropped in value until your portfolio is balanced again. It’s a time tested automated buy-low/sell-high strategy. Typically auto-rebalancing results in better overall performance provided you have a good mix of coins.
It is similar to following an index on the stock market except there the re-balancing happens in the background.
A few trading platforms that can do re-balancing:
- 3commas: only available on the $99 pro version, but of course you get full bot trading & one of the best manual trading interfaces on the market today. Highly recommended bot especially for those with prior trading experience.
3commas.io — Best Cryptocurrency Trading Platform
Smart tools for cryptocurrency investors to minimize risks, limit losses, grow profits and manage their portfolios…
- Shrimpy: is completely focused on rebalancing. The basic functionality is also 100% free. If you want additional features like “social” copying other (successful) people’s portfolios or the ability to re-balance whenever you want you can upgrade to the pro version. Another great feature is that it has an API so you integrate it into other software.
You just have to provide it with a public/secret API key to your exchange just as you would set up a trading bot.
The following exchanges are supported:
Pro accounts can also backtest portfolios to figure out which portfolio combinations benefit most of re-balancing.
Shrimpy — Cryptocurrency Portfolio Management
The easiest and most trusted way to manage your digital assets.
- Portfolio: Still in not available but you can get early access if you sign up now. Seems to offer similar features to Shrimpy.
“Portfolio goes live in the first half of 2019, with the top 1,000 signups earning up to $5,000+ in rewards.”
Portfolio — The easiest way to own and optimize a portfolio of cryptoassets! 👋
Why buy single cryptos when you can own a portfolio? Top 50 coins. Powerful automation. Lowest prices.
- Abra: If you prefer to just follow a crypto-index instead of rebalancing your own portfolio and all from the comfort of your smartphone, you could install the ABRA app. It can be used as a regular crypto wallet, to buy/exchange/withdraw crypto but also to buy BIT10 Abra’s own crypto index.
Abra is also planning to let you invest in the stock market and ETFs using cryptocurrency so certainly something to keep an eye on in the future.
Get early access to stock and ETF investing with Abra
Now you can use bitcoin to invest in stocks and ETFs from anywhere in the world. Sign up now to get early access, with…
The above references an opinion and is for information purposes only. It is not intended to be investment advice and may contain affiliate links. Seek a duly licensed professional for investment advice.