With the rise in the number of cryptocurrencies every day, our exposure to the coins is also increasing. It is not uncommon to see a lot of beginner crypto investors invest in over 30 coins at a given time.
When I started investing in cryptos, my goal was to be a long-term HODLer. I discovered many great projects which gave promising results but were soon out of the market. In short, I missed booking profits, and as there was no diversification and balancing of my portfolio, I ended up losing a lot of money.
Does it sound like your story?
Or do you also have a lot of crypto investments and want to be more disciplined?
Well, the solution is diversification and rebalancing.
In today’s post, I’m going to talk about rebalancing which I have been testing for a while, and I can confidently say that it is a concept used by the wolves to manage risk and increase the portfolio as the market swings.
Benefits of crypto portfolio rebalancing:
- Maintain a steady risk level
- Keep the different percentages of your portfolio for different categories of assets
- Results are more aligned with goals and expectations
Alright, so I assume you know a bit about portfolio rebalancing, and now you are ready to become more disciplined and grow your investment with proper risk management.
The very first step is to diversify your portfolio. You have to define which asset you would like to invest. You can have diversification based on various factors such as:
- Long-term hold (Ex: BTC, BNB, ETH, WRX)
- Top 10 CMC coins + ICO
- Coins based on categorization ( Store of Value + Anonymous/Privacy + Masternode + Smart Contracts)
- Market Cap
- Long-term hold + medium hold + Short term hold
Whatever strategy you choose, defines how much time and effort it would require from you. For example, a long-term holding portfolio will not require a lot of intervention from you until something major happens, like an exponential rise in a coin’s value in a short time.
The next major thing is to select the rebalancing cycle. In the crypto world, you can have a rebalancing cycle as short as a couple of hours to a few weeks or months. In my case, I prefer keeping it monthly or often based on market conditions.
Now, it’s time to look at the tools that will help you rebalance your cryptocurrency portfolio.
Best Crypto Rebalancing tools:
I have used 3Commas for a while, but it was only recently that I found out about its rebalancing feature. In fact, this feature is hidden and a lot of users wouldn’t even realize it until they take advantage of the portfolio feature.
When you create a new portfolio or copy a winning portfolio of someone else, you can apply the rebalancing feature. You can decide how often you want to rebalance your portfolio. In my case, I selected 12 hours.
Now, after every 12 hours, 3commas automatically rebalances my account and buys/sells coins based on my defined portfolio diversification.
3Commas offers $10 as a joining balance which is good enough to help you get started. Once you have seen the result of the portfolio building and rebalancing feature, you can grab any of its subscriptions.
- Bitfinex (I encountered an error while connecting to Bitfinex)
I discovered Shrimpy from their medium post about portfolio diversification and rebalancing. In fact, their case study on portfolio rebalancing was so persuasive, I ended up testing it, and the results turned out better than expected.
If you like, you can read both guides below:
What you will like about Shrimpy is, it’s a completely free tool.
Supported exchanges are:
You also have the option to rebalance manually or disable auto-rebalancing.
3. Holderlab: (Not Operational Anymore)
The Holderlab is another popular crypto rebalancing tool. It is a paid tool but you can use their backtesting tool for free.
You have the option to select from a pre-defined strategy or you can create your own strategy. In my opinion, it’s better to create your own portfolio and make sure to add a stable coin like USDT or USDC in it to make your portfolio rebalancing a success.
Once you are done backtesting your strategy using the Holderlab backtesting tool, you can put your desired rebalancing weightage, and start rebalancing your crypto portfolio.
The tool offers both free and paid plans, and you can pick the one based on your requirement.
More Crypto rebalancing tools:
3Commas and Shrimpy can do the job for you if your account is on an exchange that is supported by them.
If not, these extra tools will help you manage your portfolio better:
Well, I’m optimistic that with time we will have more crypto rebalancing tools. For now, you should pick one according to your requirements. I would suggest 3commas as it offers features that will help you make more money from crypto trading.
However, Shrimpy as a free option is indeed great, and if rebalancing is your only requirement, you better use this. I have not yet field-tested this tool, but it looks promising as you can see from the screenshot above. You can also use their demo feature to see how it works.
If you keep your coins in a hardware wallet, you can use one of the portfolio rebalancing excel sheets and manually balance your portfolio.
Here are a few hand-picked guides for you to read next: