Rebalancing a portfolio

[MrGodlike]

Hello everyone, I have questions about portfolio rebalancing and coin storage.

So the thing that popped up from nearly all articles I've read is that the "best" (secure) way to store your coins is on a cold wallet (your wallet, your crypto).

Now, I've been looking at rebalancing as an low-risk investment strategy. I've also found tools that can automate such a strategy. From what I've gathered, these tools require that the coins be up on an exchange that has support for plugging in via API calls so it can do those automated tasks.

I guess my question is for general trading/investing. Do you store all your assets on the exchanges in order to trade them? And if you just use a part of the assets, does it yield a lower profit?

In the rebalance scenario, because cryptocurrencies are so volatile, a daily rebalance is warranted. So I guess that holding assets on an exchange is practical and cheaper, even if less secure?

Would storing a part of the profits on the cold wallet be the best way to go?

Thank you!

[akhjob]

I guess my question is for general trading/investing. Do you store all your assets on the exchanges in order to trade them? And if you just use a part of the assets, does it yield a lower profit?

No, I hold a major portion of my Bitcoins in Hardware Wallets. I keep only 10-20% of my portfolio to trade altcoins. And as you learnt, it's always safe to hold your crypto in a cold wallet

Now, I've been looking at rebalancing as an low-risk investment strategy. I've also found tools that can automate such a strategy. From what I've gathered, these tools require that the coins be up on an exchange that has support for plugging in via API calls so it can do those automated tasks.

In the rebalance scenario, because cryptocurrencies are so volatile, a daily rebalance is warranted. So I guess that holding assets on an exchange is practical and cheaper, even if less secure?

Would storing a part of the profits on the cold wallet be the best way to go?

If you are not a believer of Crypto but just jumping into the crypto market to make some quick profits by trading, I would say don't. It is better to stay in Forex and Stocks if you are looking for low-risk investment, Crypto trading is risky and highly volatile. Alternatively, if you are a believer, hold a major portion of your Portfolio in cold wallet and trade with a smaller portion. Holding assets on an exchange might save you some transaction costs but it has some risks associated with it like hacks, scams etc.

[Upgrade00]

I guess my question is for general trading/investing. Do you store all your assets on the exchanges in order to trade them?

An exchange wallet is not meant for storing your assets, it's like a wallet you dip into when you walk into a poker house; only keep the amount you're actively trading at that time. Due to withdrawal fees, it may not be profitable to always withdraw every time you're taking a short break from trading, but if you're going off for longer than a day or two, I'll advice you withdraw your holdings.

And if you just use a part of the assets, does it yield a lower profit?

As I said above you keep what you're trading with, if you buy 1BTC to trade with actively at a time then you deposit that on an exchange. If you hold 50BTC, it doesn't make much sense to deposit all that when you only plan on trading with just 1.

[MrGodlike]

Thank you! This clears things up.

[Paycoinzzz]

We should only put some money on exchanges even if it is a reputable exchange. because hackers are always available in this market and they are day and night looking for ways to hack into the system to steal people's money. Binance is a big exchange but they have also been hacked for $ 40 million and it was a huge loss. so you should know how to manage capital and risk, do not put all your money on any exchange.

[thecodebear]

a daily rebalance is warranted.

A daily rebalance? It sounds like you just mean day trading.

So yes for day trading or any trading done on a fairly short interval you would just keep those coins in an exchange. You don't want to be rebalancing/trading most of your portfolio though if you're looking to hold long term. For example, I have 90-something percent of my coins held long term in cold storage. And the other few percent is on an exchange that I use to trade with.

[ScamViruS]

If you are a day trader, you can put some funds on the exchange. Those who trade put their funds on the exchange. After trading, many withdraw their funds again. But the most important thing is to select a reputable exchange to trade. If there is any problem, they will solve it. It is not right to think that reputable exchanges are full secure, many big exchanges have been hacked before. If you keep funds in exchange, there will be risk. So use the exchange to trade, not to hold assets.

[BitcoinTurk]

I guess my question is for general trading/investing. Do you store all your assets on the exchanges in order to trade them? And if you just use a part of the assets, does it yield a lower profit?

In the rebalance scenario, because cryptocurrencies are so volatile, a daily rebalance is warranted. So I guess that holding assets on an exchange is practical and cheaper, even if less secure?

Would storing a part of the profits on the cold wallet be the best way to go?

I take care to keep all my capital in the wallet of the exchange service only when I will be actively trading, but in some cases I may also use exhange services to hold some cryptocurrencies. Unfortunately, the earnings I indirectly earn are less when I do not actively use all of my capital, but my risk of losing my capital is also reduced.
Yes, it may be more cost-effective to keep cryptocurrencies in exchange services, but it is risky because you do not know when that service will disappear.
It makes sense to keep all of the profit margin obtained in cold wallets, you can think of it as saving money.

[Becky666]

What you see an added advantage when you jeep your coins in an exchange was made  targeted to those who will be slow to understand the fact behind if not your keys your coins s aren't yours. Things has happened in thousands of cryptocurrency exchange and many have learnt their lessons which keep them afloat. Personally, I won't advise anyone to keeps trading funds in an exchange because anything can happen as the day goes. We have heard that, exchanges disappeared with users funds on their exchange without a trace and never refunds  them back again. Keep your funds with you make sense.

[Utoy101]

Would storing a part of the profits on the cold wallet be the best way to go?

Thank you!

To be honest, the type of investment package you are into determines where to store your coins for conveniency. If you are swift or daily or swing trader, it is best if you leave your assets on exchanges where you can easily executes on them to take profits or cut loss and if you're a hodler or long term trader, it is best you save your assets in a secure wallet of the exchange as most of exchanges are always susceptible to hacks

[Sadlife]

Why not just buy those cryptocurrency with your income that is if you're holding for a long term. Because if not pulling out your investment and just rebalancing just buy more instead of going all the long process of even using paid tools to automate.
Also storing all your assets is risky, you'll never know what would happen to that exchanges.

[MrGodlike]

Thank you for all the replies, I've now developed a strategy that should mitigate the impact of a security issue.

I also have a followup question. Seems everyone is very scared of centralized exchanges, but I guess some, that are also insured by different entities, are like any other bank? Or am I missing something here?

For example if an exchange is insured in the US and UK, will the exchange only help customers based in those locales in the event of an hack?

And regarding decentralized exchanges, I'm all for decentralized anything, but even bisq got "hacked". Any thoughts here?

[Twentyonepaylots]

If you are a day trader, you can put some funds on the exchange. Those who trade put their funds on the exchange. After trading, many withdraw their funds again. But the most important thing is to select a reputable exchange to trade. If there is any problem, they will solve it. It is not right to think that reputable exchanges are full secure, many big exchanges have been hacked before. If you keep funds in exchange, there will be risk. So use the exchange to trade, not to hold assets.

Well you can let your funds sleep in an exchange however you are adding a risk on doing that, even you convert it into a currency that is less volatile or stable at all like Tether there is still a chance of losing your funds in a way that if the exchange was breached while you are not looking at it but for a long time now It is rare to see an exchange that is having trouble to keep their platforms safe from any harm, So I guess it is 90% safe but you also have to consider the degree of reputation of the exchange.

[semobo]

It depends on individual, if you have million dollar portfolio, would you keep all of them on exchange wallet? I don't think it is wise to keep all of them on exchange even trading with them is not the right thing.Just allocate a part of your portfolio into trading capital and take risk with such amount.

[suzanne5223]

Hello everyone, I have questions about portfolio rebalancing and coin storage.

So the thing that popped up from nearly all articles I've read is that the "best" (secure) way to store your coins is on a cold wallet (your wallet, your crypto).

Now, I've been looking at rebalancing as an low-risk investment strategy. I've also found tools that can automate such a strategy. From what I've gathered, these tools require that the coins be up on an exchange that has support for plugging in via API calls so it can do those automated tasks.

The rebalancing portfolio tool you're talking about is called trading bot and it still require some level of programming before it can give profitable result.

Do you store all your assets on the exchanges in order to trade them? And if you just use a part of the assets, does it yield a lower profit?

Storing of ones all assets on an exchange is not advisable even on an exchange like Binance which offered SAFU due to some complication but the profit a crypto trader made depend on his knowledge.

In the rebalance scenario, because cryptocurrencies are so volatile, a daily rebalance is warranted. So I guess that holding assets on an exchange is practical and cheaper, even if less secure?

Would storing a part of the profits on the cold wallet be the best way to go?

Thats correct but would be better not have much crypto on cold wallet rather than exchange site.

[maydna]

Store all of our assets in the exchanges will be a wrong decision because we know that the market is volatile from time to time, and we don't know when the price of all of the coin can increase or decrease. If you store at the exchanges, and there is something terrible happens, you cannot get the coin right away, and the worst is you will regret. Perhaps, you can manage a strategy to use some amount in the exchanges to trade, so you have the other amount at the separate wallet, and you only send to the exchanges when the price start rally.

If you want to store a part of the profits on the cold wallet, you can choose bitcoin, and don't use the other coins because if the other coins down, the price will go down too deep. It is better to store bitcoin in your wallet.