Smart Rebalance is a classic strategy that has been used for decades in the traditional industry. The core of the strategy is to increase the total amount of assets by selling high and buying low, at the same time maintaining the portfolio basically unchanged.
When the portfolio imbalance exceeds the ratio or when the rebalance day arrives, the rebalance will be triggered. By selling coins with a high ratio and buying coins with a low ratio, the coin ratio will be adjusted to the targeted one.
In the short term, selling high and buying low will make some coins more, whereas others less, however, due to the market volatility, the total assets will increase.
To better understand the whole process of how Smart Rebalance works, we will take an example.
Assuming now your Smart Rebalance consists of four crypto assets which are BTC, ETH, LTC and KCS. Among the portfolio, four coins are equally sharing 25% value. If now the total value of the portfolio is 1,000 USDT, thus the value for four coins is 250 USDT.
Let’s take interval rebalance as an example. If the interval was set to 12 hours, within the following 12 hours, BTC has gone up, whereas ETH went down. When the rebalance timing of 12 hours arrives, rebalancing will be triggered which means the exceeding amount of BTC will be sold, to make the ratio of the portfolio to 25% again for four coins.
Compared to the "hodl" strategy, the advantage of the Smart Rebalance approach with an intelligent portfolio robot lies in its ability to utilize rotational arbitrage between tokens through the robot's smart rebalancing conditions. This allows for capitalizing on the fluctuations between different tokens, thereby achieving the goal of increasing holdings.
With the trend of HOLDING strategy among the crypto investors, Smart Rebalance has brought a new way to hold for those investors, potentially increasing the return on holding crypto assets by taking advantage of rapid price fluctuations. When the price of the coin goes up reaching the targeted threshold, the Smart Rebalance bot will execute and distribute the additional value to other assets in the portfolio. Even if the price of the specific coin returns back to the original value before it has been rebalanced, the net profit has been achieved and naturally, the total amount of the assets increased.