Smart Rebalance crypto trading botsTrading with Smart rebalance crypto bots
Smart Rebalance crypto bots help you earn more in the long run than just HODLing the cryptos. Learn everything about the this type of crypto bots.
What is Smart Rebalance crypto bot?
Smart rebalance trading bot is a trading bot that keeps a specific pre-set proportion of each crypto in the trading bot. If the proportion of one crypto is higher than the percentage initially set, the bot rebalances to maintain the correct proportions.
Let's say you invest $100 total in two cryptos:
The rebalance bot's purpose is now to keep the proportions always the same.
So if the price of Nano increases, the proportional balance sheet might at some point be not 50/50 anymore, but 55/45. The bot would now sell a bit of Nano and buy a bit of EOS to restore the 50/50 proportion.
What are the main configurations in Smart rebalance trading bots?
When you are creating a Smart rebalance bot, you can usually change these configurations:
- Choose the cryptos you want to add to the bot (the amount can be just two, or even 10)
- Choose how much you always want to keep in each crypto. Note that the proportions don't necessarily need to be equal. You could also tell the bot to always keep 30/70 balance instead of 50/50.
- Choose if you want to use your existing cryptos or buy new ones for the trading bot
- Choose rebelancing threshold - when should the bot rebalance? Meaning, how big changes must have occurred in the price
- Choose rebalancing frequency - how often should the trading bot try to rebalance?
When setting up your crypto rebalance bot, there are different strategies you can use. The strategies depend on your risk tolerance, and also the cryptos you are rebalancing.
Rebelance based on threshold
That's one of the most popular ways of rebalancing your portfolio, but keep in mind that it might not always be as straightforward as it might look at first glance.
Imagine you add money $100 total into four coins, each of them have 25% of your investment.
If you set your threshold to 1%, then it doesn't mean that rebalance will occur when one crypto has gone up buy one percentage.
The allowed deviation in absolute percentage terms is actually 0.01x25, which is 0.25%. Now multiply that amount with the number of cryptos in the rebalance bot.
Which means that the rebalancing will occur if the value of one crypto is decreased to 24% or to 26%. And that one percentage of $25 is $1, which is actually 4%.
Low threshold rebalancing offers:
- More frequent rebalancing
- Lower returns
High threshold rebalancing offers:
- Less frequent rebalancing
- Higher potential returns
In addition to telling the bot to rebalance when specific threshold has been reached, you can tell the bot to try to rebalance at specific intervals instead. So it would try to rebalance only every 15 minutes, a day or any other interval.
Mixed rebalance strategy
Most commonly people use both threshold and periodic rebalancing at the same time when using rebalance crypto bots.
For example you can configure the rebalancing bot to try to rebalance every hour and only when the threshold of, say 5%, has been reached.
This case it would only try to rebalance every hour. And even if the threshold has been reached before.
What to keep in mind with rebalancing?
When setting up the rebalance threshold, your threshold percentage should always keep in mind the size of your trading fees.
The higher the trading fees, the higher the threshold should be.
Imagine setting up a rebalancing bot with no threshold and 15-minute intervals. This case the bot rebalances even if the changes have been really low, and if the market volatility is low, you might actually lose money because of the trading fees.
Why use smart rebalance bots?
Based on research and historical data, rebalancing your cryptos might produce way better results in long terms than just HOLDLing.
What should be your smart rebalance crypto bot goals?
What your rebalancing bots achieve or don't achieve depend a lot on your rebalancing bot configuration.
I am currently running 11 smart rebalancing bots and as it's currently sort of bear market, all of them are in the minus.
However, my goal is still to get 30% return per month with the rebalancing crypto bots.
This means that although the bots can be in the minus for now in general, I expect to have 30% more cryptos than I had the month before.
Whether that's realistic or not, only time will tell.
This gives you a good enough starting point for when the crypto prices start to go up again, because now you have more cryptos to earn from. And I didn't have to put any additional money into the cryptos to increase my holdings.
And that's exactly why the rebalancing bots can be good.
Plusses and minuses of smart rebalance bot
If all the cryptos in the bot move generally the same way (although, ideally, opposite directions on different days), with ups and downs, then smart rebalance bot is able to increase your crypto holdings.
However, in cases when one crypto gains 100-1000% in one day, and with altcoins it's more than possible, then you earn less from smart rebalancing than you would from just HODLing. Especially if the bot rebalances often and the threshold isn't too high either.
So ideally, if you expect that big changes to happen, it might be a good idea to keep half of each crypto in HODL wallet, and half in the rebalance bot. This way you have the best from both worlds.
That's just my own suggestion though, with no statistical data to back it up.
Case study: My own experience with Smart ReBalance crypto bots
I have been running the bots now between two weeks and a month, so it's a good time to see how the bots actually work.
See the Smart Rebalance case study here.
Smart Rebalance bots can help you have higher gains in the long run than just HODLing, but there are certain pitfalls you need to pay attention to.
As with any bots, think logically and trade responsibly!
So by the end of the day, it's all up to you.
I have been running 10 smart balance crypto bots on gate.io since the beginning of April 2022. How are they performing? This page is updated roughly once a week to see how well my smart balance bots are performing.
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