To Rebalance, or Not to Rebalance. That Is the Question.

Ever wondered if you should rebalance your portfolio frequently or just HODL? In this blog, we‘ll check out which method was more profitable in crypto during the bulls and bears of the past years.

Rebalancing can have a substantial effect on portfolio performance. In my previous blog, Is Rebalancing Hurting or Helping Your Portfolio, I described what rebalancing really means and in this blog, I would like to check out what was more profitable, either to rebalance or just HODL, during the bull market of 2017 and the bear market of 2018.

The 2017 bull market

The following chart shows the bull market of 2017 (1 Jan 2017 – 13 Jan 2018) and illustrates the comparison between:

  • a monthly-rebalanced portfolio (gray line),

  • a weekly-rebalanced portfolio (green line), and

  • HODLing (yellow line).

Monthly & weekly rebalancing Vs. HODL | Bull market 2017 (1 Jan 2017–13 Jan 2018)

Interestingly, as seen from the graph, during the bull market of 2017, it was most profitable to rebalance your portfolio on a weekly basis, which resulted in a 12,340% profit, in a time period of nearly one year. HODLing however, actually underperformed by a substantial margin, having achieved “only” 9,208% during the 2017 bull run. A monthly-rebalanced portfolio performed similarly to the weekly-rebalanced portfolio, with an outcome of 12,057%. What we can immediately notice, is that during the 2017 bull market, a more frequently-rebalanced portfolio had a better performance, compared to a less-frequent rebalancing alternative or HODLing.

Wondering why? Keep reading…

The 2018 bear market

Now let’s take a closer look at what was the case for the bear market of 2018 (13 Jan 2018 – 14 Dec 2018). Again, we are displaying the comparison between:

  • a monthly-rebalanced portfolio (gray line),

  • a weekly-rebalanced portfolio (green line), and

  • HODLing (yellow line).

Monthly & weekly rebalancing Vs. HODL | Bear market 2018 (13 Jan — 14 Dec 2018)

During the bear market of 2018, maintaining a monthly- or weekly-rebalanced portfolio or just HODLing resulted in nearly the same performances— 92.94%, 92.80%, and 91.65%, respectively. This should be of no surprise. If the whole market is in a downward trajectory, rebalancing or HODLing should really make no difference. When we talk about rebalancing, one of the main advantages is realizing gains — and when the market is in a free fall, there simply are no gains to realize. However, if we were picky, we could say that HODLing still resulted in the smallest loss among the three methods.

Why rebalancing was profitable in 2017 and not in 2018

The first reason lies in the market shifts and changes that occurred in the past two years. During 2017, after crypto caught the attention of the mainstream media for the first time, a tsunami of new investors entered the market every day. The market sentiment was entirely different compared to the following year when the market changed dramatically.

In the diagram below, we are checking how the market changed between January 2017 and June 2019. These are basically historical charts of the top 25 cryptocurrencies by market cap.

Market movements during 2017–2019

We can see that, from 2017 to 2018, the market changed drastically. Nearly 60% of the top 25 cryptocurrencies were substituted by new assets and only a few kept their places in this segment. From 2018 to 2019, things started to shift — the majority of cryptocurrencies remained in the top 25 (by market cap). Lastly, from beginning to mid-2019, only three assets lost their spots in the top 25 segment, while nearly all remained.

The point is that during the bull market of 2017, such market shifts and changes were a common occurrence. This resulted in more opportunities for a rebalanced portfolio to realize any outstanding gains. HODLing during such times was a worse option because the portfolio wasn’t able to seize the opportunities of realizing gains.

The second reason is kind of self-explanatory: the pump & dumps. During the bull of 2017, the pump & dumps and similar market manipulations were a common thing. Some cryptocurrencies would skyrocket in a single day by 100%, 200%, or even more. For example, let’s check out Ripple:

Pumps & dumps: example of Ripple (XRP) in 2017

In a matter of a single month, Ripple (XRP) gained 5,674% — a crazy pump. And this happened several times during 2017. Now, if we had been rebalancing on a weekly basis, we would’ve realized these outstanding gains every week. Monthly rebalancing might’ve seized this opportunity as well. However, HODLing would simply pass through this pump, resulting in no outstanding gain.


The important point that I wanted to share is that the market is growing up. What we saw during the bull run of 2017, we will likely never see again, as the current market movements are different from those of 2017. Now, the bigger cryptocurrencies are more situated and are not losing their spots, simply because they are the ones that have proven their usefulness in the past years. The market is also gaining new regulations and the institutional (experienced) investors are now entering the market more frequently. This will likely limit the pump & dumps and other manipulations which were common in 2017. All these improvements will, in my opinion, contribute to faster global adoption of cryptocurrencies.

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DISCLAIMER: This article is for informational and discussion purposes only and does not constitute a marketing message, an investment survey, an investment recommendation, or investment advice. The article was prepared exclusively for a better understanding of market dynamics.

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