Passive investing with crypto

So a follow up from my recent article >> Indexing in Crypto I mentioned a product I have used in the past called HODLBOT >> Link . I will start off by saying this is by no means a shill, I’m not affiliated with this product or have any financial gain in you using it. It is a service I have used in the past with great success and thought it would be very handy for a lot of you guys and girls out there. They do have a referral system that rewards you with a free months subscription, so if you and your mates want to give it a try, share your link around with your buddy’s to get a couple of free months on the house.

Hodlbot is a great and affordable service which I think is overlooked by many crypto enthusiasts. It takes the emotional roller coaster ride of market cycles and price fluctuation of trying to time the market on your favorite crypto coins out of the equation, using an indexing system to essentially buy low and sell high. They offer a range of different port folios or indices you can choose your self, but I found the best results by selecting the coins you would like to hold mid-long term and setting up a system to balance your port folio.

Here is an example of some of the preset port folios you can choose, mainly based of simple metrics like market cap and using equal weights, which I personally find a very poor way of indexing.
With a more strategic approach, you can have much better results than an equal weighted top 10 portfolio thats for sure, but it does require some research and analysis on the assets you choose to hold.

So how does HODLBOT work?

By using API’s from your exchange of choice like Binance, Bittrex, Kucoin, Kraken, or Coinbase Pro, you can essentially plug HODLBOT in to your account, giving it permission to buy and sell your coins.

>>> Dont worry you can customise the settings of the API on your exchange to make sure the BOT can not withdrawal your coins.

I suggest you set up a second account and try with a small amount of money to begin with until you are confident with the system.
The BOT will trade your entire account balance (unless you tell it not to) so if your already holding coins you dont want the bot to touch its best to set up a second account and transfer a smaller amount and let it trade on that, how ever there are options in the settings to list a specific coins you do not want it to touch.

I’m not going to run through the API set up as it explains how to do it on the program. Once you are all set up and connected using your API’s, its time to select a port folio or create your own and set up the parameters to tell the bot which coins you would like it to hold and how you would like it to trade them.

Here is a quick break down of the HODL 30 index which shows the coins selected in the port folio, this Index is based off the top 30 coins by market cap.
You then have the option to chose Equal weight — This means an equal amount of $ value per coin.
OR
You can chose Market cap — This means it will change the amount of each coin pending the size of there market cap. If a specific coin has a large market cap, then it will hold more of that coin than another than has a much smaller market cap.

Finally you can choose square rooted weight on market cap which essentially shifts some of the weight from being top heavy into the lower cap coins. This strategy can some times promote more growth or wiggle room on the lower cap coins.

You can then go and back test your strategy to see how well it would have performed over set times. Have a play around with your strategy and weighting to see what kind of results you can return.

Once your happy with an index this Bot will now rebalance your port folio on a preset time to maintain the same balance of weighting. What this means is, if your pre set weighting becomes out of balance, the bot will sell specific coins in your port folio and buy others to balance the preset weight out again. To properly understand this I’m going to give an example in a really simple system.

EG. Lets say you have $1000 and you want a port folio of 4 coins of equal weighting, that means out of your $1000, $250 will be used to purchase each coin which is 25% each.
If after a month, 2 of the coins had gone up 100%, and the other 2 had gone down 50% that means you would now have 2 coins with the value of $500 and 2 coins with the value of $125, with a total port folio value of $1250.
The bot needs to make sure its equal weighted 25% on each, so it will sell some of the coins that have gone up, and purchase some of the coins that has gone down, so that your now holding $312.50 worth of each coin which is 25% each.

This strategy is the easiest way to simply buy low and sell high with out any human interference, therefor not letting your emotions cloud your judgement with things like, greed and fear.

WARNING!!!
Its important to understand, this is not a sure thing way to make money, if the entire market is heading down, your bot will continue holding coins in a loss and keep rebalancing coins further and further into a hole.
This is why its important to keep an eye on the market and watch the coins in your port folio from time to time, and make sure everything is still ok. If your goal is a long term investment then you will not worry about the short to mid term volatility anyway and just let the bot do its thing.

Now as I mentioned, these equal weighted top ranking style index’s can perform ok in general but will never be the best at exponential returns and may often be missing some of those gems you may really want in your port folio, and this is where I believe this product shines.

You can build your own port folio with all your favorite coins that you believe have great potential and have the bot take the emotion out of the game for you and let it do its thing. Once you have done your research on the coins you would like to hold, simply select them from the menu to pop them into your port folio.

Next you need to have a think about the weighting of each coin based on a part system, it will also give you a nice visual of a pie chart showing the % balance of your coin allocation.

Give your port folio a name incase you end up creating a few and chopping and changing, maybe you might have a bearish PF and a bullish PF, or even a hedge PF??? have a play and see what you come up with.

Once you believe you have a solid port folio hit the back test button and see how it would have performed. You might find this is much better return than an equal weighted PF based of the top 30. Make sure you have a play around with the weights based on market cap size to see if there is any different or maybe a higher growth option by making some adjustments, But its also good to remember, previous performance does not predict future returns. As an example, something that has been out performing the market well for the last 6 months may not have much left to give and you may want to consider a smaller porting in your PF and opt for maybe some good coins that havent performed yet. Once your happy with everything you can press save and simply select your port folio and press go and let HODLBOT do the rest.

There is a nice easy to read dashboard that you can keep an eye on your results over time and you can even force a rebalancing between scheduling by simply hitting the manual rebalance button and have the bot rebalance at any time incase one of your coins goes ballistic and you want to take advantage of selling high.

I found this to be particularly handy as the bot may not know the conditions of the market in-between rebalancing dates and miss some really good opportunities to sell a specific asset at an extreme high. A quick tap of the button will sort that out for you to take advantage of any temporary highs.

The utilities tab has a few other really handy tools to make use of, like Rebalancing periods, a Cash out button, a coin Black list option and a Threshold rebalancing setting.

The cash out option
This allows you to sell a % of your port folio to a specific coin when you press it. This can be really handy during specific market conditions.

Lets say if you choose something like USDT and maybe 80% of your port folio, If the market looks like its about to take a dive, you can hit this button and have the BOT sell 80% of all your coins into USDT and ride the drop out. Once the drop is finished and your confident to jump back into the market, hit the manual rebalance and buy all your coins again on the cheap….pretty cool huh.

The blacklist option
This is pretty self explanatory, its to put things like Tron and Verge in, incase they happen to find there way into your port folio with a top 30 style strategy lol.

The threshold option
This is incase one of your coins becomes seriously unweighted between rebalancing schedules, if a specific coin goes crazy outside the set parameters, the bot will automatically take profits off the top to rebalance that specific coin.

There is a tab for Trade history as well that will show you the dated intervals of the rebalancing and what the bot has done each time with specific buys and sells and the value of each trade. This can be very handy for keeping an eye on things and getting an idea of what the bots been doing for you.

I hope this article has provided some value and insight into passively investing in crypto or given you some great ideas and hopefully some of you can have some great success using the bot.

Be sure to read some of my other articles explaining how to trade the crypto market more in depth from a financial traders perspective

Best of luck out there