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Rebalancing the Portfolio or Buy & Hold? A Comparison Between Crypto Investments Strategies

Blockchain and cryptocurrencies have attracted an outstanding amount of interest and money over the years. However, the popularity of an asset does not automatically indicate that investing in it is easy.

If you don’t know how to distinguish between reputable cryptocurrency suggestions and scammers, you’ll have a hard time making a profit. New traders often have many questions and have no idea where to begin when they first enter the market.

Different investors tend to prefer different investment strategies for cryptocurrencies. Today we will look into two prevalent approaches: buy & hold versus portfolio rebalancing.

The Passive Strategy: Buy and Hold

Many cryptocurrency investors buy and retain their holdings until they decide to sell. When it comes to technical analysis, these investors may not employ stop-loss orders in some circumstances.

Traders skilled in technical analysis may opt to enter cryptocurrency trades when small or significant price retracements are seen in the price chart. A break of resistance is a favorite entry point for other traders.

Cryptocurrency “Buy and Hold” is one of the most straightforward strategies to practice. It’s as simple as purchasing tokens and keeping your private key safe. Adding a stop-loss or a take-profit to your transaction is not required.

Investing in a successful long-term token eliminates the need to perfectly time the market. One of the most nerve-wracking aspects of cryptocurrency trading is figuring out when the market will go up or down. What is the best time to invest in Bitcoin? What about Ether? These questions generate concern and stress.

Additionally, those who trade cryptocurrencies regularly must constantly re-evaluate their entry points to avoid losing money. This method is more time-consuming and stressful. Often, it isn’t easy to get a suitable starting point. To locate a solid buy-in opportunity, you must wait for the market to change.

The Active Approach: Rebalancing the Portfolio

Conventional wisdom advises rebalancing your portfolio when the crypto section of your investment portfolio has grown considerably in value. 

Some financial experts even advocate selling your portfolio’s most successful assets, such as high-flying tokens. Selling certain investments and acquiring new ones is the process of rebalancing your portfolio to reflect your desired asset allocation. 

In addition to increasing the portfolio’s diversity, rebalancing can reduce the portfolio’s dependence on a single token or group of closely linked coins (e.g., memecoins).

While this technique sounds reasonable, it often faces a sad truth: portfolio rebalancing can be highly time-consuming. Since most retail investors typically do not trade for a living and have a primary job keeping them busy during the day, rebalancing investments can sound hard.

Some crypto projects have recently started to offer automatic systems to rebalance a crypto portfolio. Let us mention one of these initiatives in the following section.

Automating Portfolio Rebalancing with Shrimpy

Automated portfolio management platform Shrimpy allows long-term portfolio tracking and rebalancing. Members of Shrimpy may trade crypto indexes and invest to maximize profits. 

It is possible to trade on many crypto exchanges simultaneously on Shrimpy. You may use percentages and statistics to divide your crypto assets on the webpage. Depending on market conditions, the algorithm may either divide your coins manually or automatically. 

Users may also develop a portfolio plan, assess performance, study the market, and duplicate an existing strategy using this platform. In addition, users can create an index across all exchanges and trade it separately.

To rebalance your portfolio, click on the “Automation” button in your portfolio. If you want to diversify your portfolio, the platform will do it automatically. 

Instead, you might choose to rebalance at a later date. Your dashboard will always display the option “Rebalance Now” in this situation to let you trigger the procedure.

Shrimpy will also set the parameters for the portfolio’s automation. The platform likewise blocks automation that is no longer being used. 

Social trading features are also subject to the same mechanism. For example, setting up a portfolio that mirrors a trader’s moves is possible. By unfollowing the trader, though, you may prevent your portfolio from being automatically used for this purpose.

Final Thoughts

This article clarified how different strategies could achieve a good result in the crypto market. While conducting your own research on the sector is essential, we are constantly reminded how portfolio balancing can be an interesting approach.

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The issue with rebalancing is generally dependent on the stress and time-consuming operations that come with it. For this reason, investors frequently look for automated solutions, such as those offered by Shrimpy.

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