1.What is Smart Rebalance?
Smart Rebalance is a medium and long term automatic trading bot that dynamically adjusts the asset allocation in your portfolio.
In volatile markets, your bot can maintain the preset asset allocation through rebalancing at preset portfolio proportion, intervals and thresholds. This process restores the asset ratios to the predefined levels, achieving dynamic rebalancing and generating investment returns.
2.Smart Rebalance Instructions
Advantages:
When you are bullish on the long-term development of multiple coins, Smart Rebalance is a good option.
1.Risk Diversification: The bot helps to manage risk by ensuring that the portfolio is diversified, reducing the risk of drawdown due to putting all eggs in one basket.
2.Buy low, sell high: It’s common to see sectors or different cryptocurrencies rotates to rise or fall in the crypto industry. In Smart Rebalance, when assets’ prices go up or down, their shares of value in the portfolio change accordingly. Under such circumstances, the bot will automatically sell some of the assets with rising share of value at a high price and buy some of the other assets with falling share of value to bring the asset distribution in the portfolio to the initial setting and sell them when their prices take turns to rise. Through constant rebalancing, you can obtain long-term returns in rotations.
How Does Smart Rebalance Arbitrage?
By taking profits from assets that have risen quickly and using them to buy assets that have risen more slowly, you can rebalance the positions in your portfolio. This means using the profits generated by one rising asset to increase the position of another asset, thereby achieving compounding gains and ultimately obtaining additional returns. The following diagram can illustrate the arbitrage process more clearly:
Assume that a position portfolio of a Smart Rebalance consists of two digital assets: BTC and ETH, whose shares are 50% and 50% respectively, namely, 50 U for each.
Note: Users can set up multiple asset combinations in the Smart Rebalance portfolio, each with different proportions. The example provided is for demonstration purposes and uses the simplest scenario with just two types of assets.
Subsequently, the price of ETH rises to 80 USDT, while BTC rises more slowly, reaching only 60 USDT. At this point, the value of ETH exceeds that of BTC by 20 USDT. Through smart rebalancing, we aim to restore both assets to their initially set equal values. Therefore, ETH needs to allocate half of its profit to BTC.
That means selling 10 USDT worth of ETH and buying 10 USDT worth of BTC. As a result, the value of both assets becomes 70 USDT, returning to the initial 1:1 value ratio. At this point, the user’s total holdings increase to 140 USDT, compared to the initial 100 USDT. This 40 USDT gain represents the profit from smart rebalancing.
3.Smart Rebalance Parameters Descriptions
Parameters Interpretation
Coin Setting: Add at least two tokens that you would like to hold for Smart Rebalance. Up to 10 tokens are supported.
Equal: Once enabled, the bot will evenly distribute the holdings of your selected tokens as shown in the example. (Friendly reminder: The holding ratios can be manually adjusted for each token according to your preferences, but the total holdings ratio must equal 100%.)
Total investment: Must be greater than or equal to the minimum investment amount, which is linked to the number of digital assets added to the portfolio.
“Allow Using Tokens You Already Have”: When enabled, the strategy will be allowed to use the digital assets that have been added to the position portfolio in your spot account for investments.
Rebalancing frequency: The proportion of each digital asset in the portfolio changes with its price within a rebalancing period. When the rebalancing point comes, the bot will rebalance the position portfolio to restore its set proportions.
Rebalancing threshold: When the periodical rebalancing point comes and the proportion change of a single asset in the portfolio breaches the rebalancing threshold, rebalancing will be triggered. If the rebalancing threshold is not set, the position portfolio gets rebalanced according to the rebalancing frequency alone.
Smart Rebalance Cycle & Threshold Example
Assume your current investment portfolio consists of two assets: BTC and ETH. Your initial asset allocation is set to 50% BTC and 50% ETH. If the total value of your portfolio is 1000 USDT, then the value of both BTC and ETH would be 500 USDT each.
If your rebalancing mode is set to rebalance based on a time interval, and the interval is set to 24 hours, the Smart Rebalance bot will check whether the current value proportion of each asset matches your initial allocation when the 24-hour period is reached.
If, within 24 hours, the value of your BTC assets increases and the proportion of the portfolio value becomes 52%, i.e., 520 USDT, while the value of ETH decreases and its proportion becomes 48%, i.e., 480 USDT, then BTC has 40 USDT more than ETH.
The Smart Rebalance bot will execute a “sell high, buy low” action by selling BTC and buying ETH to restore the portfolio’s allocation to the initial 1:1 value ratio. This means transferring the excess 40 USDT from BTC, giving 20 USDT to ETH. Eventually, both BTC and ETH will have a value of 500 USDT each, without incurring any losses.
If your rebalancing mode is set to threshold-based rebalancing, for example, with a rebalancing threshold of 3%, it means that the portfolio will automatically adjust when the allocation proportion of any asset changes by 3%.
So, if the proportion of BTC in your portfolio increases from 50% to 53%, or decreases to 47% at any given time, the Smart Rebalance bot will automatically execute a “sell high, buy low” action.
Time Interval-Based Rebalancing
Smart Rebalancing Process: Initial Allocation > Position Changes Within the Set Time Interval > Rebalancing at the End of the Time Interval > New Allocation > Position Changes Within the Next Time Interval > Rebalancing at the End of the Time Interval > New Allocation
Threshold-Based Rebalancing
Smart Rebalancing Process: Initial Allocation > Position Reaches the Set Threshold (e.g., 3%) > Position Automatically Adjusts to Initial Allocation > Position Reaches the Set Threshold (e.g., 3%) > Position Automatically Adjusts to Initial Allocation
4. How to Create/Terminate Smart Rebalance Bot?
4.1 How to Create Smart Rebalance Bot?
There are two methods:
1.Follow a bot provider/Copy a backtesting bot: You can filter out top performers or backtesting bots in the Recommended section and follow a provider or copy a bot to trade.
2.Customize your own bot: You can choose coins according to your judgment of market movement, and start your own bot by setting the bot’s auto-rebalancing parameters.
Tips: Smart Rebalance can also be used in ETF.
Complete Process of Smart Rebalance Creation
WEB:
Bots - Create a Bot - Recommend - Smart Rebalance - Set Parameters - Create
APP:
Bots - Create Your Own Bot - Smart Rebalance - Create
4.2 How to Terminate Smart Rebalance Bot
You can terminate Smart Rebalance at any time.
1.Smart Rebalance should be terminated timely when one or more coins are consistently declining.
2.When the bot ends, the remaining coins will be transferred to your Spot Account. You can then decide whether to sell coins in the spot market or not.
Gate reserves the final right to interpret the product.
For further assistance, please visit the Gate official support page or contact our customer support team.