Crypto Basket Rebalancing Compared with Buy and Hold in 2021
Summary
The article reviews a 2021 basket of Binance perpetual-contract cryptocurrencies and compares holding an equally weighted index with rebalancing strategies. It constructs normalized price series, fills missing prices, and compares average and median performance. The discussion highlights how a small number of exceptional winners can lift the average far above the median, and reports that excluding newly listed contracts still left a strong index result. It then simulates hourly rebalancing toward equal weights when an asset’s portfolio share moves beyond a five percent band, including a fee assumption.
The reported results vary with the selection: broad rebalancing lagged the average index, while a basket excluding the largest gainers exceeded the corresponding average; a test focused on the top three eventual gainers did even better. That last selection uses future outcomes, so it cannot serve as a tradable selection rule without introducing look-ahead bias. The results also come from one strong altcoin year and depend on the chosen universe, missing-data treatment, fees, and simulation assumptions. They should not be read as evidence that the same approach will generalize.
Key ideas
- A broad crypto basket’s average return can be dominated by a few extreme winners.
- The article compares equal-weight buy-and-hold performance with band-based rebalancing.
- Reported rebalancing results change substantially when the asset universe changes.
- Selecting assets by their eventual gains introduces look-ahead bias and is not a usable prospective rule.
- The 2021 results are period-specific and depend on data and backtest assumptions.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.