Research Finds HODLing Isn't the Best Way to Invest in Crypto

A research paper released by Shrimpy, a cryptocurrency investment platform integrated with Binance, Bittrex, and Poloniex, demonstrated that HODLing is not the best method of investment in the crypto sector.

Researchers at Shrimpy discovered that adapting to market conditions by rebalancing a portfolio of cryptocurrencies far outperforms the HODLing method, which refers to the strategy of holding onto major digital assets for a long period of time.

The first had two cryptocurrencies, the second had four, the third had six, the fourth group had eight, and the fifth group had 10 cryptocurrencies.

The performance of each group of cryptocurrencies was measured by four criteria: rebalancing every one hour, one day, one week, and one month.

The fifth group had the highest number of assets at eight cryptocurrencies with a rebalancing method in which every one hour led to a 234 percent gain.

In contrast, the one-month rebalancing method recorded a mere 41 percent profit.

Conclusively, the researchers said that rebalancing beat HODLing by 64 percent on average, based on the portfolios they evaluated and analyzed throughout the past 12 months from major exchanges such as Binance.

"Rebalancing beat HODL by a median of 64%. After taxes, this represented 92% of all possible cryptocurrency portfolios."

Rebalancing, on an hourly basis, is not a viable cryptocurrency investment strategy for everyone, especially for beginner traders and newcomers.

Given that the crypto sector is still in an early stage in which blockchain networks are experiencing exponential growth both technically and in terms of value, researchers believe that diversification and rebalancing based on the conditions and the trend of the market can assist investors to strengthen their portfolios.