June 30, 2020 |
James Messi
What is rebalancing?
Rebalancing can be both manual and automatic. In this article, we’ll look in-depth at platforms that offer automatic rebalancing cryptocurrency portfolio services. Rebalancing involves changing the weightings of a portfolio of assets by sporadically buying and selling specific assets in the portfolio to main an optimal allocation. This allocation might be a certain amount of risk or a certain percentage of specific assets.
For example, risk levels can be ascribed from volume levels or price movements or market capitalisation (and others). Low cap stocks and shares’ prices are more easily moved by single actors and so would have higher risk levels than high cap stocks and shares. The same is true of cryptocurrencies. Tezos, for example, is more easily influenced than Bitcoin in the same way Pfizer is more easily influenced than Apple.
How does rebalancing work?
Assume that an investor would like a 25% allocation into big-cap coins, 50% into mid-cap coins, and 25% into small-cap coins. The portfolio management software mentioned in this article would track the performance of the coins you invest in and try to maintain the correct weightings. The software automatically adds more coins when they lose value and selling coins when they gain in value.
Profits from high-performing assets can be redirected into assets that haven’t yet performed as well. Taking the earlier example of high, mid, and small-cap coins, if the small-cap coins were performing well and the rest were stagnant, profits can be taken and redirected towards mid and high cap coins.
What are the benefits to rebalancing?
Rebalancing’s main aim is to diversify a portfolio by effectively minimising risk whilst maximising associated profits. If the portfolio allocations were allowed to grow and contract naturally a short term price spike could lead to an overbalanced portfolio in regards to one stock/coin/token. If that same stock were to then fall in value it would exhibit large losses on the entire portfolio. By using a rebalancing strategy, investors can redirect funds to another investment. This can lead to a more stable portfolio.
Holderlab.io portfolio management
Beaxy has recently integrated with Holderlab creating a stronger link between the two platforms. Essentially giving Beaxy users greater access to Auto-Balancing services whilst increasing users and volume to the platform.
Holderlab offers free and paid plans. Paid plans of $7.99 and $14.99. More complex plans involve backtesting and ready-made portfolios. The most advanced plan gives users the ability to use trailing stops, and their ‘efficient crypto index strategy’.
To connect your Beaxy account to HolderLab’s portfolio management tools, start by clicking here to create a HolderLab account. Next, go to the API Management section of the platform to create your API keys. In the HolderLab dashboard, click on Exchange and select Beaxy. Finally, enter the API keys you generated into the HolderLab dashboard and click connect. At this point, you’re ready to explore HolderLab’s portfolio management automation tools.
Shrimpy’s automated long-term strategies
Shrimpy has a completely free option as a tool and is integrated with a number of exchanges, however, many of its professional applications are behind a paywall. Accounts for enterprises are available as well. They also allow manual rebalancing through the platform. The platform connects right to the wallet on the exchange itself and automates your trades that way which is certainly an easy process.
Its slick social environment allows you to mirror your trades with other professional traders, automatically copying their traders with the social portfolio manager. In terms of cost, it offers a free service, however, in order to get full access to rebalancing features, you’ll need to buy the professional service for $13 per month. That comes with a number of other features like backtesting and the social aspects described earlier.
3Commas’ cryptocurrency trading bots
3Commas is unique in that it offers derivative support in the form of futures. It specifically supports Bitmex, Binance Futures, ByBit, and FTX Futures bot, which is certainly a differentiator in comparison to the other options for rebalancing services.
The cost is higher than other options, however. The full plan costs $594 per year but there are also other options with fewer features that cost less. For example, the starter pack costs $174 per year and the advanced pack costs $294.
3Commas has a rebalancing feature which isn’t immediately obvious. By applying the rebalancing feature, you have full control over how often you want to want to rebalance your portfolio. This gives it the ability to trade automatically to meet diversification specifications.
Should you automate the management of your portfolio?
The automated portfolio rebalancing tools mentioned in this article are universally valuable regardless of the amount you are investing. Leveraging automated strategies allows you to remove emotions from your allocation decisions. They also free you from having to manually implement your strategy which carries additional risk for human error. Over the long-term, small investing errors early can result in dramatic differences in the future value of your portfolio. It’s important to use every advantage you have available to mitigate losses and protect the value of your portfolio. Utilizing pre-built rebalancing and reweighting strategies can help you to accomplish that.
