The following study will evaluate the performance difference between rebalancing on a periodic interval and holding. By examining different intervals, we can determine which rebalancing frequencies had the largest performance increase over simply holding. This study was set up using the following constraints.

Trades & Data

Data was collected from Bittrex starting on March 15th 2017 and ending on October 20th 2018. All of the data points were collected as exact bid and ask values for each asset. This provides the precise prices that would have been used if trades were actually executed at each time. Additionally, all trades included the .25% fee which is standard for Bittrex. A trade from LTC to XRP would therefore first trade from LTC to BTC (which would incur a .25% trading fee) and then from BTC to XRP (which would incur another .25% trading fee). The result is a fee model that is as accurate as possible.

All our data is available through the Shrimpy Historical Data API.

Rebalance Period

The primary variable for this study is the rebalance period. A rebalance period is the specific amount of time between each rebalance. So, a period of 1 day would result in a rebalance every single day at the exact same time. In this study, the rebalance periods that will be tested are 1 hour, 1 day, 1 week, and 1 month. Learn more about rebalancing for cryptocurrency.

Portfolio Size

The portfolio size for this study has been fixed at 10 assets per portfolio. Learn more about how the number of assets in a portfolio affects performance.

Asset Selection

Constructing each portfolio was done at random. All assets which were available between March 15th 2017 and October 20th 2018 on Bittrex were included during the selection process. This amounts to a total of 110 different assets. The list of assets which were included in this study can be found by navigating to the backtest tab in the Shrimpy application and then selecting the same timeframe as the one mentioned above. Learn more about how to build a strong portfolio.

Backtest

A backtest is the process of using the trade data from the exchange to simulate how a strategy would have performed over a given time period. This is often used to test the viability of a strategy by running it through large data sets. In this study, we used backtests to compare the results of rebalancing to those of buy-and-hold. The number of backtests we ran for each portfolio size and rebalance period pair was set to 1000. Read more about backtests or run your own.

Performance

The performance for each backtest was determined by taking the final rebalancing value and comparing it to the final buy-and-hold value. This was done by using the equation: (Rf - Hf) / Hf, where Rf is the final rebalancing value and Hf is the final buy-and-hold value.

Monthly Rebalances