Rebalancing Strategy For Your Crypto Portfolio

crypto investment

With each cryptocurrency portfolio rebalance you own, your portfolio has a greater chance of profiting. Even though not every investment will succeed, with the right asset allocation and diversification, your chances of long-term success increase. A collection of cryptocurrencies that a trader or investor owns is known as a crypto portfolio. Altcoins and cryptocurrency financial instruments are frequently included in portfolios together with other diverse assets.

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Although the current crypto forecast is cloudy, the future of cryptocurrency is a bright and sunny one. Luckily, there are various ways to diversify your crypto portfolio, depending on your level of risk tolerance, and we’ll explore a number of them in the following article. Select any coins, choose a weighting strategy, and see how it performed in the past.


Traders have to pay transaction fees to the cryptocurrency exchanges during portfolio rebalancing when they sell and buy assets. For novice traders with cryptocurrency portfolios of lesser value, portfolio rebalancing might cancel out their gains after accounting for the transaction fees. Asset allocation is an essential component in ensuring stable returns.

There are several strategies that you can apply to allocate a certain percentage of your portfolio based on the functionalities of different cryptocurrencies. In fact, one of the safest and most profitable ways of doing so is through crypto copy trading in which you rent automated investment strategies created by the world’s best crypto traders. And Trality’s Marketplace offers a quick, transparent, and trusted way to rent battle-tested, profitable bots for all market conditions. Having a portfolio that lacks diversification is a risk that crypto investors cannot afford to take.


A little amount of forethought will go a long way toward building a portfolio that is appropriate for your risk tolerance. Assign the necessary weights to your portfolio’s investments at high, medium, and low risk. A portfolio with a sizable percentage of high-risk investments is undoubtedly unbalanced. It may have the potential to give you greater gains but it also may result in significant losses. What is best for you will depend on your risk profile, but there should be a balance. Financial cryptocurrency products can also aid in further diversifying your portfolio.

This could be a stable giant such as Bitcoin or a volatile altcoin such as Ethereum. This text is informative in nature and should not be considered an investment recommendation. It does not express the personal opinion of the author or service. Any investment or trading is risky, and past returns are not a guarantee of future returns. Leverage enables traders to operate on a margin, essentially multiplying their buying power to make greater profits from smaller investments. portfolio diversification is important for investors to broaden their exposure to this emerging asset class. Such value fluctuations can sometimes feel very uncomfortable to investors, especially novice crypto investors. This is because price swings in crypto markets are often more extreme compared to legacy markets. If your cryptocurrency investments increase in value, you may need to sell some so that your portfolio doesn’t get too crypto-heavy. A portfolio that’s 25% or 50% cryptocurrency puts you at significant risk if there’s a market downturn. By gradually decreasing positions as they become a more significant part of a portfolio, the bot can generate additional profits than simply holding the cryptocurrencies.

Is rebalancing better than holding?

The constant-mix rebalancing strategy outperforms buy-and-hold during these up and down moves. Constant-mix rebalances during market volatility, buying on the dips as well as selling on the rallies.

Portfolio rebalances generally lead to risk mitigation and improved returns. Firstly, one of the biggest gifts that an investor can afford is a strategy that can eliminate emotions from investment decisions. A diversified portfolio of crypto assets has both benefits and drawbacks. Crypto market investors can also diversify across industries by investing in public companies that are pursuing blockchain projects.

Final Thoughts on Diversifying Your Crypto Portfolio

Now, after every 12 hours, 3commas automatically rebalances my account and buys/sells coins based on my defined portfolio diversification. 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. Their periodic auto-rebalancing will keep your portfolio diversified even in volatile markets, distribute risk across assets and bring profit from asset price fluctuations. In this whole process, you don’t even have to lift a finger, but you still get to enjoy peace of mind as well as save time.

  • What portfolio rebalancing is, how and when it’s implemented, as well as what benefits and drawbacks it has will be explored in this article.
  • However, variety in some degree is typically regarded as advantageous.
  • Portfolio rebalancing is an effective investing strategy that allows you to secure profits and prevent losses.
  • There are quite a few ways to diversify your crypto portfolio, and you’ll find all the most common strategies below.

To set up the trading bot in proportional mode, click the highlighted menu and then Proportional. Next, enter the percentage imbalance at which you want your portfolio to rebalance. The cryptocurrency market is quite erratic, therefore you should base your choices on the circumstances at the time. Coinbase is the largest U.S.-based cryptocurrency exchange in the market at this time. The platform is geared towards novices and features a simplistic interface that simplifies basic trading activities. Currently, Coinbase is one of the most reputable exchanges in the world.

To protect your gains, you can quickly transfer tokens out of a project into a stablecoin backed by dollars like BUSD. Trading for a stablecoin takes much less time than converting to fiat. The closer your portfolio tracks the broader market, though, the more diversified it is. The majority of traders and investors want to outperform the market with bigger gains.

6 Strategies for Better Management of Your Crypto Portfolio – Quick and Dirty Tips

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When one asset in the smart portfolio trends upward versus the others, the trading bot automatically starts to sell assets gradually, effectively taking profits. You can use the smart portfolio trading bot with any asset on OKX that trades against USDT — which is almost all of them. You can also construct your smart portfolio with up to 10 different cryptocurrencies.

There are a number of strategies for diversifying your cryptocurrency portfolio into multiple tokens. As prices change, you’ll likely need to buy and sell certain crypto investments to maintain a balanced portfolio. For example, if a few of your smaller investments increase in value, you may need to trade some of them for larger cryptocurrencies to keep your desired asset allocation. Smart portfolio mode is perfect for cryptocurrency investors who want to maintain balanced exposure to a range of crypto assets but might not have time to manage their positions actively. The trading bot automatically executes trades to rebalance your portfolio according to the parameters chosen when setting it up — you can just set it and forget it.

  • They say you should only invest what you can afford to lose, and in the case of leveraged trades, this can be a tough rule to follow.
  • This is required so you can later accurately compare investment performance and know what your capital gains were for tax purposes.
  • If I sell an asset, there’s the risk that it will continue rising in value, forcing me to lose money on a good asset.
  • Basically, it allows them to keep track of how the crypto coins’ value changes over time.
  • Fortunately, or unfortunately, the crypto market is more complicated than that.
  • You can use CryptoTrader.Tax to automate the crypto tax-reporting process.

Similarly, a crypto portfolio can be defined as a grouping of diverse cryptocurrencies that you hold and trade on your selected trading platforms. Depending on your investment strategy, diversifying a cryptocurrency portfolio can also produce some tax consequences. Furthermore, investing in digital assets is highly speculative and volatile, and only suitable for investors who are able to bear the risk of potential loss and experience sharp drawdowns. There are advantages and disadvantages to both sides, therefore it’s up for dispute how much you should diversify.

You’re not supposed to rebalance the portfolio if anything changes percentage-wise – you simply stick to your time schedule. Which one you’ll use depends on how you want to manage your risk tolerance, portfolio diversification, and asset exposure. Let’s say that I have invested in a crypto portfolio made of Bitcoin and a couple of altcoins. I decided to invest 50% of my capital in Bitcoin, and evenly split the remaining 50% into Ethereum and Chainlink.

If I want to protect my capital and ensure profits, I need to exchange a portion of my tokens for stablecoins. Rebalancing optimizes a portfolio by selling assets that have moved up and redistributing funds into assets that haven’t moved yet. If a random altcoin jumps 300% in value, you might want to take profits and secure your win.


You also have better odds of cryptocurrency portfolio rebalance in the most successful cryptocurrencies. We often see certain cryptocurrencies go through periods where they significantly outperform the rest of the market. The more cryptocurrencies you have in your portfolio, the more likely it is that you’ll be invested in those outliers and can share in their gains. With your rebalancing parameters set, enter the total amount of USDT you want to use to create your smart portfolio in the “Investment amount” field. Holderlab save more than 336 hours on manual rebalancing of assets annually. Crypto-to-crypto trades are treated as “taxable” events by the government.

This creates a “sell low, buy high” scenario, resulting in losses. 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 rebalancing is necessary, you will sell and buy assets within your portfolio in order to meet the target allocation. BTC This could prove to be a bit tricky as you’ll need to do your best to execute transactions as close together as possible. With threshold rebalancing, your portfolio’s asset allocation is adjusted when an asset’s value crosses a particular threshold.


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