Thread by @Captain1Block

⭐ (Re)Balancing your coins out of the bear market! 🐻

The bear market is the perfect time to build positions, but most of those positions can be in huge losses by the end of it.

Here's a strategy to avoid capitulation and make the most of this season by rebalancing!
🧵 👇

1/What is Rebalancing?
It's a technique/strategy used by fund managers and investors alike to adjust risk and maintain asset allocation. It lets you capture the potential with risk-adjusted exposure to the flipside. I'm using the @kucoincom smart rebalancing bot for this.

2/Why not just HODL?
Because hodling some coins is just not the best sometimes. I'd prefer hodling #BTC or #ETH but what about some altcoins that plummet 70% in the bear market?

2.1/I have no problems hodling the large caps and safe midcaps and yield farming them to grow my stash. But some alts are not battle tested, have no past performance indicators and you want to have a safe exposure to them while also wanting to make that sweet 10x.

2.2/The other reason could be to maintain a particular risk profile with certain assets that you're comfortable with. it could even be BTC/ETH that want to have exposure to but with some safety in place.

3/Is it completely automated?
It could be, but I prefer to be a hands on investor and keep monitoring my positions, to change stance wherever needed. I would continually change bot parameters to adjust to the changing market to maximize profits/minimize losses.

4/Types of Rebalancing
Broadly, I've used these 2 strategies in #crypto ,

• Rebalance one/more tokens together -
Much like automatically buying low and selling high according to the rebalance ratio/calendar. Will keep a defined exposure to tokens to capture optimal upside.

4.1/The flipside is your capital will keep declining as the coins plummet and you would need to add new money to keep the position afloat. No cash reserve.

4.2/The other strategy that we'll discuss includes a cash reserve.

• Rebalance one/more tokens with USD (your choice of stablecoin)
Toss the tokens in your basket but with a stablecoin to cushion the flipside but it would also soften the upside based on your token(s)/usd ratio.

4.3/On its own, as an automated strategy, this is much like an index fund that provides you optimum risk:reward. You will always maintain a set ratio of cash reserve that you can dip into for needs/other investments.

4.4/Lower token(s)/usd ratio will lower risk but also lower returns. Higher token(s)/usd ratio will increase risk but also more profits.
So, you can set your risk level and let it work for you and use your capital efficiently while maintaining a reserve at all times.

5/Risks associated with this strategy ⚠️
If one coin goes to zero and you're not monitoring then the bot will just pour all your money into that token and you'll loose most of the upside from the rest. This is serious and that's why constant monitoring is required in crypto!

5.1/For this reason, I use this strategy with my highest conviction mid/smallcaps with a lot of research put in, to know what I'm buying into and what can be expected in relation to price action. I know the risks and I choose to take them. Understand your risk clearly.

6/Also, if you really wanna do this with BTC/ETH then theres no need to do it yourself, there are quite a few quality indices that give you exposure but also manage risk,
• $GLP on @GMX_IO
• Stable YAP on @Midas_platform
• @BanklessHQ BED index on @tokensets

6.1/So why do I use this? 💩
Only so I can have a safety net and release capital when/where I want on the time/price scale. With the allocated capital, the bot keeps buying low/selling high and I release/retract capital as and when I see the upside/downside.

7/So what really is the strategy? 📈
• Allocate budget for the investment in one go to the bot.
This helps to budget my entire or partial investment in the project and I don't have to move money around too often for purchases. Rebalancing mixed with a trading strategy.

7.1/ • Keep stablecoin ~70% and ~30% for the token(s)
We start with a higher % of stablecoins bc we are expecting more downside to begin with. We will slowly adjust ratio based on market conditions and risk tolerance.

7.2/ • Set rebalance strategy to either % wise or as per calendar event.
For ex: balance when coins are +/-3% OR every 4hrs. This depends largely on fees incurred for balancing, volatility of asset and your tax implications.

7.3/ • Besides letting the bot do its thing automatically, I also manually control the release of stablecoins into the balance pool. As the price goes down, I follow my DCA rules and release some % of my stablecoins every time we dip 7%-10%.

7.4/ For ex: We start with,
→ 70% $USDC / 30% $REN
$REN dips 8% and I release 5% of my USDC to buy the dip and the bot now has more money to buy low/sell high.
→ 65% $USDC / 35% $REN
$REN pumps 5% so I claw back my $USDC by 2% to claim some profits.
→ 67% $USDC / 33% $REN

7.5/I'll keep releasing on the dips and clawing back on reasonable pumps. I can continue this even when the bottom has been marked and an uptrend has started, bc no one really knows where the bottom is. I'll do this till I am left with 10%-15% $USDC that I will always reserve.

7.6/ If the mother of dips comes right after I hit 10% then I guess you gotta add more moolah to the bot, bc thats how crypto is 😅 , but hey! at least because of the auto and manual DCA, your losses aren't as much as the next guy 😭

→ If making a partial investment to begin, then you can also choose to add more capital into the bot, for ex, some % of $USDC, everytime we dip 15% from entry. Set your rules and follow them diligently!

7.7/ Crypto is not a set and forget investment unless you've got the patience of a monk & deep pockets like a VC! You need to know your TA and FA and be very sure of your moves. Keep updated and spend time to learn and research. Never gonna make $$ without the effort!

8/ This sustained release and clawback of capital to/from the pool manages risk quite well and you're never fully exposed. I feel #crypto is such a space where being safe is the default option for long term wealth. We're in a world of ponzis waiting to rug/collapse. So, #DYOR

9/
⚠️ Don't try to do this with absolute shitcoins.
⚠️ Always monitor your positions.
⚠️ Managing risk is super important!
⚠️ Aim for the long term!
⚠️ Follow up on the projects to discover fundamental changes that might affect price.

10/ If you liked this 🧵 then please retweet and like the first post to support me! If you have suggesstions for this strategy then send me a DM 💬

Thanks for your time and go make some money! 💰