Binance's Rebalancing Trading Bot
Binance’s Rebalancing Bot
A rebalancing trading bot is a form of automated investing instrument that assists in maintaining a target asset allocation in a cryptocurrency portfolio by regularly purchasing and selling assets as needed to align the portfolio with the goal allocation. These bots may be programmed to follow a number of strategies and invest in a variety of cryptocurrencies.
The crew of Binance recognizes that many users want to remain on top of developments in the fast-paced cryptocurrency market, but not everyone is in a position to trade actively utilizing the myriad of tools accessible throughout the Binance Ecosystem. In that case, Binance has created the Rebalancing Bot: to give people a simple method to rebalance their portfolios on a responsible and trustworthy platform.
To use Binance's Rebalancing Bot, you must first establish an account and then log in. After logging in, go to the strategy trading page and pick Rebalancing Bot.
The Rebalancing Bot will modify your holdings in the token combination of your choice automatically. By rebalancing at predetermined intervals or thresholds, you can keep the asset value ratio constant by purchasing cheap and selling high. You may customize the auto-rebalancing function of the bot to be activated by changes in a specific coin's ratio or by predetermined time intervals.
Understanding Rebalancing Strategy
A rebalancing approach may be an effective technique for managing an asset portfolio in a sideways market. Prices may vary in such a market, but they eventually revert to their previous levels. Using a rebalancing strategy to acquire more of an asset when its price is low, investors may be able to lower the total cost of their portfolio and maybe enhance their returns. They can also use the rebalancing approach to lock in any unrealized profits by selling a portion of an appreciated asset and utilizing the proceeds to purchase other assets. When you select the binance rebalancing bot option, the bot will only rebalance when the change in any asset's ratio reaches the predefined threshold value, which can be 0.5%, 1%, 2%, or 5%.
Consider the following scenario:
Portfolio: BTC and BNB
Time: 1 minute (default)
The coin ratio is 1%.
800 USDT invested
Initial Coin allocation: 50%
In other words, the provided portfolio begins with 400 USDT worth of BTC and 400 USDT worth of BNB. The algorithm will automatically determine the ratio of each token in the portfolio, which in this example is 50% for each asset.
Assume that after certain market moves, the BTC and BNB values in the portfolio become 450 USDT and 550 USDT, respectively. The overall portfolio value is now $1,000 USDT, and the coin ratio has shifted to 45% BTC and 55% BNB. When the ratio difference surpasses the preset amount of 1%, automatic rebalancing is started.
To equalize the positions and restore the original allocation, the bot will purchase 5% of BTC and sell 5% of BNB:
BTC value = 450 + (1,000 * 5%) = 500 USDT
BNB value = 550 - (1,000 * 5%) = 500 USDT
After rebalancing, the portfolio will include 500 USDT worth of BTC and 500 USDT worth of BNB. The ratio has been restored to 50%.
Rebalancing can also be done based on the time period. This rebalancing bot will change its portfolio for fixed time intervals. The advantage of time-based rebalancing is that it may be used to respond to the present levels of volatility in the crypto market. When asset prices are reasonably steady, a portfolio may stay balanced with few modifications, however in stormy times, shorter intervals will be more effective to absorb the volatility. However, if the rebalancing time is too lengthy, it might result in a portfolio that is not sufficiently diversified.
Auto-Invest vs. Rebalancing Bot
It's vital to distinguish Rebalancing Bot from Binance's Auto Invest function. While Auto Invest enables users to make recurrent investments by automating the acquisition of predefined assets on a regular basis, it is not intended to change users' portfolios. The Rebalancing Bot, on the other hand, allows investors to diversify their risks and automatically balance their holdings by purchasing and selling assets as needed.
Rebalancing Bot Trading fees
When paying with BNB, Rebalancing Bot customers receive a 25% reduction on ordinary trading costs.
You will first pay the usual trading charge from the Rebalancing Bot Wallet and then get trading fee refunds in your Spot Wallet. To view your BNB fee history, navigate to [Orders] - [Rebalancing Bot] - [Fees Return History].
Please keep in mind that you must have a sufficient BNB balance in your Spot Wallet to cover the trading costs. Otherwise, you will not receive your 25% trading charge rebate. For additional information, see How to Use BNB to Pay Fees and Earn a 25% Discount.
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