What is Binance Rebalancing bot?

Kabirogungbayi

6 min readApr 15, 2023

15/04/23

•What is the Rebalancing Bot?

•Why you should Rebalance

•Rebalancing based on coin ratio

•Rebalancing based on time

•Rebalancing Bot vs Auto-Invest

•How to setup a Rebalancing bot on Binance

•Conclusion

What is the Rebalancing Bot?

The Rebalancing Bot will automatically adjust your portfolio position in the token combination of your choice. By buying low and selling high, your strategy can maintain the same ratio of asset values through rebalancing at preset intervals or thresholds.

The bot’s auto-rebalancing feature can be triggered by coin ratio or time intervals.

Why you should Rebalance

The need for rebalancing arises when the cryptocurrency market experiences volatility and the relative value of certain cryptocurrencies in the portfolio changes. For example, if the value of bitcoin increases significantly, it may cause the portfolio to be overweight in BTC and underweight in other cryptocurrencies. In this case, rebalancing the portfolio would involve selling some bitcoin and buying other cryptocurrencies to restore the desired allocation.

Rebalancing is important for several reasons. First, it helps to manage risk by ensuring that the portfolio is diversified and not overly concentrated in one cryptocurrency. Second, it helps to maintain the original investment strategy and objectives. Third, it can potentially increase returns by selling overvalued assets and buying undervalued ones.

Overall, cryptocurrency portfolio rebalancing is a necessary process to ensure that the portfolio is optimized for risk and return. Those who approach trading systematically would do well to rebalance regularly and with careful consideration of market conditions and their investing goals.

Rebalancing based on coin ratio

When you choose this option, the bot will only rebalance when the change of any asset’s ratio exceeds the preset threshold value — 0.5%, 1%, 2%, or 5%.

To illustrate, let’s consider the following scenario:

•Portfolio: BTC & BNB

•Time: 1 minute (default)

•Coin ratio: 1%

•Amount invested: 800 USDT

•Initial coin allocation: 50%

In other words, our hypothetical portfolio initially contains 400 USDT worth of BTC and 400 USDT worth of BNB. The system will automatically calculate the ratio of each token in the portfolio, which in this case is 50% for each asset.

Imagine that, after some market movements, the BTC and BNB values in the portfolio become 450 USDT and 550 USDT, respectively. The total portfolio value is now 1,000 USDT, and the coin ratio has flipped to 45% BTC and 55% BNB. The ratio difference exceeds the preset level of 1%, so automatic rebalance will be triggered.

To restore the original allocation, the bot will rebalance the positions by buying 5% of BTC and selling 5% of BNB:

BTC value = 450 + (1,000 * 5%) = 500 USDT

BNB value = 550 — (1,000 * 5%) = 500 USDT

After rebalancing, the portfolio will hold 500 USDT worth of BTC and 500 USDT worth of BNB. The ratio is restored to 50%.

Balancing based on token ratio can be beneficial for those who want to ensure that their portfolio is diversified and evenly balanced. However, it can also result in missed opportunities if certain coins consistently perform better than others.

Rebalancing based on time

With this time-based approach, the system will check whether a rebalancing is needed at fixed time intervals. You may set the interval to 30 minutes, 1 hour, 4 hours, 8 hours, 12 hours, 1 day, 3 days, 7 days, 14 days, or 28 days.

Consider the following scenario:

•Portfolio: BTC & BNB

•Time: 7 days

•Coin ratio: 0.5% (default)

•Amount invested: 800 USDT

•Initial coin allocation: 50%

Again, the hypothetical portfolio contains 400 USDT worth of BTC and 400 USDT worth of BNB. The bot is set to automatically calculate the ratio of each token in the portfolio every 7 days. If the calculation shows that the share of one of the assets has deviated from the original value by more than 0.5%, the rebalancing will be triggered. From there, the rebalancing process is the same as described previously.

The strength of time-based rebalancing is that it can be employed to adjust to the current levels of volatility in the crypto market. When asset prices are relatively stable, a portfolio can remain balanced with infrequent adjustments, while in turbulent times shorter timeframes will be more useful to absorb the volatility. That said, if the rebalancing period is too long, it can result in a portfolio that is not diversified enough.

Rebalancing Bot vs Auto-Invest

It’s important to note that Rebalancing Bot is different from Binance’s Auto Invest feature. While Auto Invest allows users to make recurring investments by automating regular purchases of predetermined assets, it is not designed to adjust users’ portfolios. In contrast, the Rebalancing Bot allows investors to diversify their risks and automatically balance their holdings, which it achieves through both buying and selling assets as necessary.

Rebalancing Bot Trading Fees

Rebalancing Bot users can enjoy a 25% discount on standard trading fees whenever they choose to pay the fees with BNB.

You will first pay for the standard trading fee from the Rebalancing Bot Wallet and receive the trading fee refunds in your Spot Wallet. To check your BNB fee history, go to [Orders] — [Rebalancing Bot] — [Fees Return History].

Please note that you must have a sufficient BNB balance in your Spot Wallet to pay for the trading fees. Otherwise, you will not receive your 25% trading fee rebate. For more details, please refer to How to Use BNB to Pay for Fees and Earn 25% Discount.

How to setup a Rebalancing bot on Binance

1. Log in to your Binance account and click [Trade] — [Strategy Trading].

Click [Rebalancing Bot].

If you are using the Binance App, tap [Strategy Trading] — [Rebalancing Bot].

2. You will be redirected to the Rebalancing Bot trading interface. Go to the parameter box on the right. You can use the [AI Rebalance] for preset parameters or set up your own strategy from [Manual].

If you choose [AI Rebalance], the system will automatically set up the strategy parameters for you. Click [Create]. You may also click [Copy parameters to Manual settings] to customize the parameters.

If you choose [Manual], click [Add Coins] to select the coins for your strategy. Please select at least 2 coins. You may select up to 10 coins for each strategy.

Set the rebalancing parameters, including coin allocation, investment amount, and the auto rebalance method. You may also set up a trigger price, a stop-loss price, and a take-profit price under [Advanced (Optional)]. Click [Create].

3. To check your Rebalancing Bot orders and history, go to [Orders] — [Spot Orders] and click [Rebalancing Bot].

You may adjust your investment for a running strategy from [Running]. Click the edit icon to edit, or click [End] to terminate the strategy.

4. For an overview of your strategies, go to [Wallet] — [Overview] and click [Rebalancing Bot].

Conclusion

Binance’s new Rebalancing Bot allows users to automatically adjust their cryptocurrency portfolios to maintain their desired asset allocation with ease.

Signup on Binance with the link below

https://accounts.binance.com/en/register?ref=56091445