For decades investors have used the portfolio rebalancing strategy to eliminate unprofitable assets while maintaining the highly profitable. In the crypto world, these decisions are based on the token or coin values at a particular time.
Crypto portfolio rebalancing is a strategy used by crypto-asset owners to apportion their tokens to maximize their value and returns. Portfolio rebalancing gives you the opportunity of increasing your earning by taking advantage of price fluctuations. Investment decision-making in the crypto world is highly dependent on how right the holder is at analyzing assets.
What rebalancing strategies exist in the crypto world? This article looks at these strategies and more modern automated features provided on Shrimpy.
This strategy is also known as time-based portfolio rebalancing. Periodic/time-based portfolio rebalancing is where you fix a time interval in which you will be rebalancing your portfolio. Since the crypto world is a 24/7 highly volatile economy, you might need to be rebalancing on an hourly, daily, or weekly basis. Periodic rebalancing only takes into account the time factor in crypto rebalancing.
Frequent rebalance in the crypto world can boost returns. In other traditional financial systems, even longer time rebalancing such as annual ones will earn you profits.
Threshold rebalancing is a technique that allows a crypto holder to rebalance their portfolio only when it matters. Unlike the periodic strategy, which focuses on the time factor, this strategy checks on the deviation of the asset value. The strategy uses a concept of allocation deviation strategy to determine how much assets have deviated from the target allocation. Therefore, it calls for rebalancing only when the asset’s value has deviated from the target by a minimum predetermined threshold: 20%, 30%, or 10%.
Different platforms use different ways of determining the portfolio rebalance. However, when considering the platform to use, you should check on the ease of use to you as a crypto holder.
This strategy combines both the time and threshold balancing conditions. It focuses on rebalancing the portfolio in a specific time interval, but when the asset value has reached the set threshold.
For example, a crypto holder may set the interval for rebalancing the portfolio at one week when it hits a 7% threshold. After the week, they notice the asset’s value has not deviated to the set threshold, which means there is no need for evaluation and rebalancing of the portfolio since it has not varied.
In another case, the deviation hit the threshold set in the middle of the interval. However, in the rebalancing date, the deviation falls back to below the threshold. There is still no need for rebalancing at this point since, at the rebalance date, the variation did not hit the threshold. This strategy, therefore, is followed when both the time and limit are met.
Doing manual rebalancing will consume not only your energy but also a lot of your time. However, the crypto world has new automated inventions that help ease your pains. One such automation is the Shrimpy platform, which automates the asset rebalancing for you as a crypto asset holder. But how can you use the platform?
- Sign Up For Shrimpy- Visit the shrimpy website and sign up to their page. Fill in the required details.
- Login to your shrimpy account- You can now access the page that gives you exchange options. Select the exchange that you use and enter valid API keys that have all trading permissions enabled.
- Select your Portfolio- Create your portfolio by touching on the create a new portfolio icon.
- Use the add asset icon to add assets to your portfolio.
- Input the allocations to specific assets in the portfolio by pressing on the rebalance icon, and the shrimpy platform will automatically rebalance your portfolio.
Shrimpy has a back-testing tool that allows you to construct a portfolio from a selected crypto-list to analyze portfolio returns. The test brings results of a comparison between a buy and hold strategy and Shrimpy’s rebalancing strategy.
The crypto world has seen an upsurge in the number of assets, each coming with its advantages. Asset holders are therefore trying to find ways of yielding more returns from their tokens hence portfolio rebalancing-the above calls for the crypto reapportionment, which is done from time to time.
It’s very crucial to get the most suitable strategy to use in rebalancing your portfolio. The time, threshold, and time threshold combined strategy have both advantages and disadvantages. It is, therefore, important for every crypto holder to find expert assistance. Shrimpy automates the rebalancing process and offers a timely and accurate rebalancing. All said portfolio rebalancing is vital for crypto enthusiasts if they want the growth in the value of their assets.