Cryptocurrency investing is gaining traction and becoming more accessible to both retail and institutional investors. Many investors are becoming familiar with the concepts and principles of crypto investing, including long-term holding, day trading, and so on. For those new to crypto investing, it can be overwhelming to keep track of all the different aspects of managing their investment portfolios.
Auto-Rebasing and Auto-Compounding are two important functions that simplify the process of crypto investing and provide a range of advantages for those new to ‘Altcoin’ investing. In this guide, we will explain what auto-rebase and auto-compound are, why they are beneficial in digital asset portfolio management, and how they apply to an example portfolio.
What is Auto-Rebasing?
Auto-rebasing is an investment strategy where the user automates their specific investment rules, usually aimed at maximizing yield. Essentially, it adjusts their holdings between a number of different assets and rebalances according to their chosen parameters. By setting up criteria to measure success, they are able to make strategic decisions without needing to manually intervene in order to optimize returns.
Rebasing allows users to create personalized investment strategies through diversification. Instead of investing large lump sums into certain assets, they can break investments down into small chunks that are allocated between different cryptos (e.g., Vulcan Blockchain). This reduces the risk of any one investment going down significantly, as the portfolio balances itself out if one asset starts falling in price or stagnating in returns. Over time those investments tend to increase steadily until a point of equilibrium is reached when all parts of the portfolio have equal amounts of money allocated toward them.
What is Auto-Compounding?
Auto-compounding is a feature offered by certain crypto-investment platforms that allow investors to automatically re-invest the proceeds from their investments into the same portfolio. This type of re-investment is often referred to as compounding. By automatically reinvesting, rather than withdrawing profits and reinvesting manually, investors can take advantage of the growth potential of a diversified portfolio.
Auto-compounding works by constantly reinvesting your earnings and dividends into your chosen portfolio. The amount you decide to compound is based on your individual investor preferences and strategies, with more conservative investors typically opting for smaller amounts than more aggressive ones.
Advantages of Auto-Rebasing
One major advantage of auto-rebasing is portfolio diversification. As more and more digital currencies come into existence and compete with fiat currency, auto-rebasing allows STA holders to increase their banking exposure and expand their portfolio beyond traditional forms of investment without having to actively purchase any additional assets. By receiving a few extra coins each day, STR holders can quickly create a passive income stream that grows over time without having to do anything at all!
Another advantage of auto-rebasing is increased stability for both the currency as a whole and individual wallets/accounts associated with it. When there are frequent releases taking place, it helps maintain liquidity in the currency by encouraging users to continue purchasing or holding onto their existing coins instead of selling them off on speculation or in panic due to market downturns.
Additionally, since additional coins become available upon each reversionary event, wallets that have been inactive for some time can still benefit from receiving new coins due to others buying/selling crypto assets within their ecosystem which may offer greater consistency compared to simply saving for long terms goals – such as retirement plan– using traditional methods alone.
Advantages of Auto-Compounding
Auto-compounding offers many advantages, such as:
-Increased Trading Frequency: Instead of manually investing a lump sum of capital into the markets and having it sit for long periods of time, auto-compounding lets you deploy more frequent trades with smaller amounts. This allows you to rapidly increase your crypto portfolio size and take advantage of short-term opportunities in the market.
-Portfolio Diversification: Auto-compounding enables investors to quickly diversify their portfolio by spreading their profits across multiple assets and tokens. This prevents overexposure to any single asset or token and helps manage risk effectively over time.
-Strategy Customization: With auto-compounding, investors can customize their strategies according to their individual risk appetite or goals. From parameters such as maximum drawdown, allocation size per trade, and frequency of trades, investors can tailor auto-compounding settings without sacrificing potential returns.
How to Utilize Auto-Rebasing and Auto-Compounding
When auto-compounding is used in conjunction with auto-rebasing it can lead to minimal volatility while still allowing customers to make a steady profit from small spikes in the cost of tokens. Auto-compounding forces a user’s cryptocurrency wallet or account to immediately reallocate their gains into buying more of the asset being invested in, drastically increasing their total position size within a certain amount of time— leading to larger long-term profits for users who hold onto their investments for several weeks or months at a time as opposed short term trades made every few days or hours.
Potential Risks
The first is a vulnerability to market volatility – due to the automated nature of these strategies, investors may find themselves exposed to price swings in the underlying cryptocurrency. Also, in order for these strategies to be effective and successful, investors must possess an understanding of technical analysis tools and market trends, as well as a thorough knowledge of fundamental investments concepts; otherwise, there is an increased risk for losses due to misreading markets or incorrectly using investment tools.
Furthermore, because auto-rebasing and auto-compounding may involve multiple transactions within a short time frame (due to frequent rebalancing activities), investors must also consider transaction costs when using these strategy types; otherwise, such fees could significantly eat into an investor’s overall return.
Therefore, it is important for potential users of auto-rebasing and auto-compounding systems to understand both their benefits and risks before deciding if this type of strategy is best suited for their investment goals.
Conclusion
Crypto investing has the potential to offer significantly higher returns than traditional asset classes. When considering how to invest, investors should take into account the benefits of using auto-rebase and auto-compounding tools. These options allow investors to maximize their returns in a hands-free manner, as well as reduce their overall risk by allocating funds to multiple cryptocurrencies.
As investments become more complex and technology improves, investors are increasingly turning towards automated solutions for their crypto investing needs. This can provide a way for both novice and more experienced investors to secure maximum profits within the crypto sphere.
