How does Portfolio Rebalancing operate and what does it entail?
There are a plethora of cryptocurrency trading tactics available. As a result, each method has its risk profile and time commitment. HODLing (buying crypto and holding it for the long term) is a terrific alternative; if trading isn't your thing, you still want to get on the crypto train. Prices, like those of other financial products, seldom go up or down in a straight line.
Furthermore, the cryptocurrency market is quite volatile. You won't gain from price fluctuations by merely HODLing, but this may be swiftly remedied. That's when rebalancing, or balancing, comes into play. This method is quite simple. Furthermore, the primary premise is that a cryptocurrency portfolio must be kept in balance, which implies that each crypto portfolio must be retained with a predetermined amount of money.
Rebalancing a Portfolio: An Example
Each currency will receive a 20% allocation in an equally dispersed portfolio of five coins. Furthermore, as the respective price levels vary over time, you must preserve that allocation. When a cryptocurrency's value rises faster than the rest of the portfolio, the bot will sell some of the coins to reduce the portfolio's distribution.
When the price of the coin falls, the bot purchases part of it.
Selling on a high and buying on a low is precisely what a successful crypto trader does. Unfortunately, because of their emotions, many people find it challenging to trade in this manner (e.g., FOMO and FUD). Portfolio balancing removes all emotions from the equation. You follow a straightforward plan and don't have to consider "what if constantly?". Several books have been written about this method. Shrimpy.io has created an excellent whitepaper covering the strategy, its various flavors and alternatives, and the anticipated outcomes in great detail. You can manually balance your portfolio by examining and modifying allocations on a daily or weekly basis. Again, several books have been written about this method. This is when automation enters the picture. Balance Bot was created exclusively to perform portfolio balancing 24 hours a day, seven days a week. Establish a portfolio with your preferred cryptocurrencies, and Balance Bot will handle the rest.
Review of the Balance Bot: Features
The Balance Bot is a newbie to the market. It was released for the first time in March of 2021. However, despite its youth, the feature set of this device is highly outstanding.
Web application
Balance Bot is a web program that works on practically any computer. Windows and macOS systems, Raspberry Pi, NAS devices, and most cloud computing platforms are viable options. In addition, you can run Balance Bot for free if any of these options are already installed on your computer. You can run Balance Bot for free if you have any of these options already installed. However, suppose you'd instead run it in the cloud. In that case, Hodlerhacks has a simple script for installing Balance Bot on a Linux server, as well as recommendations for decent cloud alternatives starting at $3.50 per month.
Dashboard:
Every bot comes with its dashboard. You can also configure the bot via the dashboard. Configuration is a straightforward four-step procedure. First, you give Balance Bot your portfolio's API credentials, specify the target distribution for each cryptocurrency, and select the rebalancing threshold. Assume you have a portfolio of 10 coins with an equal distribution and the point is set at 3%. In that case, the bot will purchase any currency with a lower allocation than 9.7% and sell any cash with a higher percentage than 10.3%. In the parameters used to calculate your bot's performance, you can optionally provide the initial balance. You can select the 'recreate history' option if you have previously used another balancing bot or have been manually balancing. The Balance Bot will next analyze your previous transactions to calculate performance over time, displayed in helpful graphs.
Cooldown Trigger
You can also set a "cooldown trigger" in the setup. There's a chance that your exchange will generate too many trades if the market is highly volatile. Furthermore, it is possible that the exchange's trading API becomes overloaded and stops responding in such a situation. A cooldown period is initiated to avoid unnecessary trading fees on your crypto exchange. This occurs when the bot completes a set amount of transactions in less than 5 minutes. It's also an excellent method to protect your portfolio and keep transaction costs down.
Manual Mode
Balance Bot can be run in manual mode if desired. For example, you can use it to signal buy/sell opportunities in this fashion. If you decide to rebalance, all it takes is a simple click to complete the necessary transaction(s) to bring your portfolio back into balance. However, while this may be good when you first start to gain confidence in the crypto trading bot, you'll most likely switch to automated mode once you see that everything is set up and working well. The dashboard, once set up, displays your portfolio as well as the distribution of your coins.
KPI Performance Section
It also includes various key performance indicators (KPIs) that are extremely useful:
The whole portfolio's current value is in BTC, EUR, or USD.
Since the beginning, the a relative change in overall portfolio value.
In BTC, EUR, or USD, the net balancing effect. This graph depicts the difference between the portfolio value after balancing and the portfolio value before suspending.
Since the beginning, the relative change in the net balancing effect.
Coin Chart
A coin chart, which shows the relative price change of each currency versus BTC since the start of balancing, is another valuable tool for analyzing your portfolio. You'll be able to see which coins are outperformers and which are underperformers in one glance. And, yes, this is where the app's "dark mode" shines the brightest.
Event History
All significant events and transactions are recorded in the event history. This is the place where you can always go back in time to see what happened. A helpful filter allows you to look for transactions involving specific coins. You may even use your smartphone to access the Bot Manager and the bots' dashboards. Of course, not all options are available, but the essential functionality for managing and monitoring your Balance Bots is. Balance Bot has an excellent Telegram integration to improve the mobile experience. You may create a Telegram bot that works with Balance Bot in a few simple steps. As a result, you may monitor the status of your bots, receive orders, and do other things right from Telegram.
How do the Balance Bot works?
To get the Balance Bot up and to go, you'll need some basic computer abilities. Unfortunately, it isn't available as a completely self-contained web service. Competing programs do provide this; however, there is a cost associated with it. Hodlerhacks chose not to go down that road to keep their costs low, allowing Balance Bot to be distributed for free.
The step-by-step instructions offered on their website should be sufficient for most folks to get things up and to run.
The application can be installed in two ways:
- Manual installation: this method works on Windows, Mac OS X, and most other systems.
- Cloud deployment: Balance Bot is installed on a Linux server in the cloud using an easy-to-use script.
Comparison with other products: Hodlerhacks Balance Bot vs. Shrimpy
Similar goods can be found on the market. We have mentioned Shrimpy.io and their whitepaper at the start of this essay. They're undoubtedly one of the most well-known options. Balance Bot is a cloud-based platform that supports many exchanges while exclusively working with Binance. However, as compared to Balance Bot, it has some significant drawbacks.
First and foremost, Shrimpy.io is a subscription-based service. The cheapest plan is $19 per month, and the most expensive plan costs $299 per month. Even at $19/month, you'll need a sizable portfolio to see any net beneficial returns. Furthermore, the balance refresh rate on Shrimpy's cheapest package is just once every 15 minutes. Balance Bot rebalances every 10 seconds, so keep that in mind.
Finally, Shrimpy's most basic package only allows for three bots. You'll probably never need that many, but you never know. Balance Bot has a significant edge over other bots in that it can support up to 1000 bots.
Balance Bot is a clear winner for most people if you don't mind the somewhat more involved installation process. With its broad feature set and no-strings-attached free fee policy, it is a clear winner for most people.
Balance Bot Review: Pros and Cons
Balance Bot is a stylish and feature-rich program that automatically balances your bitcoin holdings. To install the bot, you'll need some basic computer abilities. However, once you've followed the step-by-step instructions, you'll be ready to let Balance Bot handle the rest.
You gain from crypto price volatility by balancing your portfolio, and you ensure that your emotions don't get in the way of implementing a solid trading strategy. Balance Bot currently only supports Binance, but it is one of the finest solutions for portfolio rebalancing due to its low trading fees (and the additional 10% discount granted by Hodlerhacks).
Balance Bot Review: Conclusion
Balance Bot is a beautiful alternative if you're seeking a portfolio balancing bot. Its completely free service is exceptionally outstanding. Although there are good competitive choices on the market, there is little reason to pay for such services now that Balance Bot is available. In addition, it has a comprehensive range of features and tools for analyzing the performance of your portfolio, all wrapped up in a beautiful user interface.