Introducing Rebalancing Bot: Adjust Your Crypto Portfolio Effortlessly
Main Takeaways
Binance's new Rebalancing Bot allows users to automatically adjust their cryptocurrency portfolios to maintain their desired asset allocation with ease.
Rebalancing is important to manage risk, trade in line with your investment objectives, and potentially increase returns by selling overvalued assets and buying undervalued ones.
The Rebalancing Bot can be used to rebalance based on either preset time intervals or changes in a certain coin's ratio.
Managing a diversified crypto portfolio can be challenging, especially for those who are new to the world of digital finance. One concern that investors in the fast-moving crypto space face is the need to rebalance from time to time. Rebalancing is the process of adjusting the holdings in a portfolio to maintain the desired asset allocation. This means buying or selling certain assets to ensure that the portfolio maintains a specific mix of tokens based on the investor's risk tolerance and investment objectives.
That's where Binance's new Rebalancing Bot comes in. This tool provides users with a seamless way to adjust their portfolios automatically either at fixed intervals or whenever the coin ratio deviates from the set value. In this blog, we'll dive into the benefits of using the Rebalancing Bot on Binance, how to access it, and how to balance your portfolio based on a time interval or token ratio.
Why Rebalance?
The need for rebalancing arises when the cryptocurrency market experiences volatility and the relative value of certain cryptocurrencies in the portfolio changes. For example, if the value of bitcoin increases significantly, it may cause the portfolio to be overweight in BTC and underweight in other cryptocurrencies. In this case, rebalancing the portfolio would involve selling some bitcoin and buying other cryptocurrencies to restore the desired allocation.
Rebalancing is important for several reasons. First, it helps to manage risk by ensuring that the portfolio is diversified and not overly concentrated in one cryptocurrency. Second, it helps to maintain the original investment strategy and objectives. Third, it can potentially increase returns by selling overvalued assets and buying undervalued ones.
Overall, cryptocurrency portfolio rebalancing is a necessary process to ensure that the portfolio is optimized for risk and return. Those who approach trading systematically would do well to rebalance regularly and with careful consideration of market conditions and their investing goals.
Binance’s Rebalancing Bot
At Binance, we understand that many of our users want to stay on top of the developments in the fast-paced cryptocurrency market, yet not everyone is in the position to trade actively using the multitude of tools available throughout the Binance ecosystem. That's why we've built the Rebalancing Bot: to provide users with a way to rebalance their portfolios on a responsible and trustworthy platform with minimal effort.
To access Binance’s Rebalancing Bot, you'll need to create an account and log in. Once you're logged in, head over to the strategy trading page and select Rebalancing Bot.
The Rebalancing Bot will automatically adjust your holdings in the token combination of your choice. By buying low and selling high, your strategy can maintain the same ratio of asset values through rebalancing at preset intervals or thresholds. You can choose the bot’s auto-rebalancing feature to be triggered either by changes in a certain coin’s ratio or preset time intervals.
Rebalancing based on coin ratio
When you choose this option, the bot will only rebalance when the change of any asset’s ratio exceeds the preset threshold value – 0.5%, 1%, 2%, or 5%.
To illustrate, let’s consider the following scenario:
Portfolio: BTC & BNB
Time: 1 minute (default)
Coin ratio: 1%
Amount invested: 800 USDT
Initial coin allocation: 50%
In other words, our hypothetical portfolio initially contains 400 USDT worth of BTC and 400 USDT worth of BNB. The system will automatically calculate the ratio of each token in the portfolio, which in this case is 50% for each asset.
Imagine that, after some market movements, the BTC and BNB values in the portfolio become 450 USDT and 550 USDT, respectively. The total portfolio value is now 1,000 USDT, and the coin ratio has flipped to 45% BTC and 55% BNB. The ratio difference exceeds the preset level of 1%, so automatic rebalance will be triggered.
To restore the original allocation, the bot will rebalance the positions by buying 5% of BTC and selling 5% of BNB:
BTC value = 450 + (1,000 * 5%) = 500 USDT
BNB value = 550 - (1,000 * 5%) = 500 USDT
After rebalancing, the portfolio will hold 500 USDT worth of BTC and 500 USDT worth of BNB. The ratio is restored to 50%.
Balancing based on token ratio can be beneficial for those who want to ensure that their portfolio is diversified and evenly balanced. However, it can also result in missed opportunities if certain coins consistently perform better than others.
Rebalancing based on time
With this time-based approach, the system will check whether a rebalancing is needed at fixed time intervals. You may set the interval to 30 minutes, 1 hour, 4 hours, 8 hours, 12 hours, 1 day, 3 days, 7 days, 14 days, or 28 days.
Consider the following scenario:
Portfolio: BTC & BNB
Time: 7 days
Coin ratio: 0.5% (default)
Amount invested: 800 USDT
Initial coin allocation: 50%
Again, the hypothetical portfolio contains 400 USDT worth of BTC and 400 USDT worth of BNB. The bot is set to automatically calculate the ratio of each token in the portfolio every 7 days. If the calculation shows that the share of one of the assets has deviated from the original value by more than 0.5%, the rebalancing will be triggered. From there, the rebalancing process is the same as described previously.
The strength of time-based rebalancing is that it can be employed to adjust to the current levels of volatility in the crypto market. When asset prices are relatively stable, a portfolio can remain balanced with infrequent adjustments, while in turbulent times shorter timeframes will be more useful to absorb the volatility. That said, if the rebalancing period is too long, it can result in a portfolio that is not diversified enough.
Rebalancing Bot vs Auto-Invest
It's important to note that Rebalancing Bot is different from Binance's Auto Invest feature. While Auto Invest allows users to make recurring investments by automating regular purchases of predetermined assets, it is not designed to adjust users’ portfolios. In contrast, the Rebalancing Bot allows investors to diversify their risks and automatically balance their holdings, which it achieves through both buying and selling assets as necessary.
Rebalancing Bot Trading Fees
Rebalancing Bot users can enjoy a 25% discount on standard trading fees whenever they choose to pay the fees with BNB.
You will first pay for the standard trading fee from the Rebalancing Bot Wallet and receive the trading fee refunds in your Spot Wallet. To check your BNB fee history, go to [Orders] - [Rebalancing Bot] - [Fees Return History].
Please note that you must have a sufficient BNB balance in your Spot Wallet to pay for the trading fees. Otherwise, you will not receive your 25% trading fee rebate. For more details, please refer to How to Use BNB to Pay for Fees and Earn 25% Discount.
Explore Strategy Trading on Binance
In addition to the Rebalancing Bot and Auto-Invest, Binance offers other automated trading strategies such as spot grid trading and futures grid trading. Our Spot Grid Trading Bot automates the placement of orders in the spot market at preset intervals within a configured price range. The Futures Grid Trading Bot employs a similar logic in the futures market. Both strategies attempt to make profits on small price changes and perform best in volatile markets when prices fluctuate within a specific range.
Conclusion
Binance's Rebalancing Bot offers a convenient solution for those looking to manage their cryptocurrency portfolio with minimal effort. The tool allows for automatic portfolio adjustments, either at preset intervals or when the coin ratio deviates from the set value, making it easier to maintain a diversified portfolio. Rebalancing regularly can help increase returns and maintain the original investment strategy and objectives, ensuring the portfolio is optimized for risk and return.
Note that Rebalancing Bot follows the spot trading fee rates. There are no additional fees charged. For BNB fee deduction history, please visit Fees Return History for more details.
Further Reading
(FAQ) What Is Rebalancing Bot and Frequently Asked Questions
(Blog) Step-by-step Guide to Grid Trading on Binance Futures
(Disclaimer) Strategy Trading Disclaimers
Risk warning: Binance does not determine the suitability of any portfolio or Rebalancing Bot parameter and makes no representation or warranty that the Rebalancing Bot strategy will perform as expected or will be profitable. Any risk associated with a Rebalancing Bot resides with the user. Transactions entered into via a Rebalancing Bot may incur trading fees. You should consider the impact of trading fees on the performance of the relevant portfolio before deciding to use the Rebalancing Bot and setting any relevant parameters. Binance shall not be responsible for any losses incurred in connection with any Rebalancing Bot strategy.