April 2, 2018

I Quit my Job and Launched HodlBot - Automatically Diversify into the Top 20 Cryptos

Over the Christmas break I realized I was spending close to 5 hours a month manually rebalancing my portfolio of ~20 cryptocurrencies weighted by market cap.

I got sick of that pretty quickly so I decided to make a bot that uses Binance’s API to automatically handle that.

A few months later, I quit my job and I’m releasing the hosted version of the bot. Now anyone can put their trade-only API keys into HodlBot, and it will automatically trade into the top 20 cryptos. It will also handle monthly rebalancing automatically.

I dig into the portfolio construction and share the algorithm in this blog I wrote here:


Link straight to the app here: https://www.hodlbot.io

  1. 4

    Great great product. I love the idea.

    I‘m learning about indexing and buy and hold investing right now and it’s so exciting to see that people are finally getting it in the crypto space. Sure, it’s super boring to invest passively but at least in the stock market it’s the only serious way to go.

    But I’m curious whether coin diversification mitigates the risk like it does with stock. I feel like the coin prices are more strongly correlated to each other than different classes of stocks.

    Translating common finance market theory to the crypto space is a very interesting topic I believe.

    1. 2

      That's a really good point. John from Spreadstreet has done some work on this.


      In theory, you can hedge different coin pairings against each other to reduce volatility. I.e. if one coin goes up, one goes down.

      We're currently doing research on pairs that have negative covariance to create a HODL minimum volatility index. Stay tuned :)

  2. 3

    This is super cool. I want to get started :) You say you help users get onboard. Can you reach out to me or where can I reach you?

    One more question:

    What is the business model aside from the subscription? I guess you earn fees on Binance referrals too?

    1. 1

      Hey Robin! I'd love to help. Shoot me an e-mail at anthony@hodlbot.io and I can walk you through on a video chat :)

      Nothing so far! We plan to grandfather our existing users if we ever decide to increase $ in the future.

      Binance referrals are completely optional. You can choose to make an account with us as the referral or not. :)

  3. 3

    Cool stuff! What's the logic behind using the top 20 cryptos? Why not do a true index and invest in the ENTIRE market?

    1. 1

      Like all 7000+?

      A "true index" often isnt the entire market. It's a selection of the market like S&P500 or Dow Jones. In crypto there is no established index that gets tracked other than coinmarketcaps top 100. But the top 100 changes so frequently the trading fees would eat your entire portfolio before long. You'll get worse value not better.

      1. 2

        James is right.

        There is no established index. But we gave it our best shot.

        We take the top 20 coins and assign each coin a % allocation based on their weighted market capitalization.

        Then we cap every coin to be at most 10% of the total portfolio value. Anything above 10% gets redistributed to all the coins below by weighted market capitalization until the entire sum of the portfolio adds up to 100%.

        On a 3 year backtest, we found that the average trading fees for monthly rebalancing the HODL 20 on Binance only 0.26% a year.

    2. 1

      That's a great question.

      The top 20 captures ~87% of the crypto market by market cap. In comparison the S&P500 captures ~ 75% of the US equity market. In the future we're going to add the ability for users to create their own indices.

  4. 2

    Great product. Having been a trader on the equity and forex markets earlier happy to see something like this in the crypto market. Two questions.

    1. Why is the monthly charge so low?

    2. Do you have plans for an enhanced service where you are more like a full service crypto plan to hand hold investors but still keep the keys with the client so that you have no financial/fiduciary responsibility?

    1. 1
      1. The monthly charge is low so we can keep it affordable for non-accredited investors :) It's still an early stage product, so we don't have all the features built for it that we want. I.e. dollar cost averaging, create your own portfolio, multiple portfolios per one account etc.

      2. Manual trading is a lot of effort. But we do recognize that some users will want to have more ownership of their security.

      Technically you can use HodlBot as a spot solution for one-time rebalances. You put in keys, let the trades execute. Then delete the keys on Binance's end, and then put them back in time for the next monthly rebalance.

      It's more work, but there's a trade-off between security and convenience.

  5. 1

    Hi,in the article it is stated that it beats the returns of bitcoin and hodl30 without balancing. As the last 3 months was bearish can you also make the comparison for these last 3 months? Does it also beat them in while crashing?

    1. 1

      The time period I used was March 2015, to March 2018. I didn't include April, but the data should show a few of the bearish months.

      That's something I'll look into for now. An important point to make though is that we're not trying to beat the market, just track it with the HODL 20.

  6. 1

    Is there a plan for custom frequency? Just having "monthly" is quite limiting IMO. Since crypto market is so volatile, sometimes backtest give high results for as frequent as 5min rebalancing.

    1. 1

      Yes custom frequency is something I will add. I don't know if we'll ever go as low as 5 min rebalancing. But definitely weekly.

  7. 1

    Hi Anthony, this sounds very interesting. In Germany coin-to-coin transactions are taxable. Is there are way to only re-balance if it's profit/loss neutral? Also can it buy a balanced basket for X dollars every month?

    1. 1

      Hey ! Thank you for the comment :)

      Right now we don't have a feature for that. But soon you'll be able to create your own portfolio so it can buy a balanced basket for X dollars every month (assuming you continue to fund your binance account).

      Tax implications are definitely important to consider. We're allowing users to export their transaction logs as a csv. There are a lot of great tax tools that can use this data to build reports.

  8. 1

    How much does this cost & is this secure?

    1. 1

      It's $1 the first month, and $10 after.

      We only require trade-only API keys so no one can withdraw funds from your account!

      On our end we encrypt them with a cryptographically secure hash function. Plus you can decide the API keys on Binance's side anytime rendering the info we have useless.