Crypto Indices and How to Manage Them
For crypto owners with little to no trading experience, the Shrimpy application is a simple and effective solution for managing crypto without the complicated bells and whistles. Unlike most complex crypto trading bots, Shrimpy takes just minutes to set up!
Let’s walk through the steps to create and manage your own exchange-traded crypto index with Shrimpy.
Create & Connect your API Key
Before we guide you through the steps of API trading, you will have to create an exchange API Key and connect it to the Shrimpy App. Detailed instructions on how to link your exchange account to Shrimpy can be found below.
Once you’ve linked your API keys, head on over to Portfolio to create your personal cryptocurrency index. Here’s where the fun of creating your crypto index begins.
Construct your Custom Cryptocurrency Index
You’ll have two option on how you’d like to construct your portfolio. You can choose to add crypto assets manually, or you can choose to use Shrimpy’s Index feature to automatically construct a portfolio based on selected preferences.
Market Cap Weighted Index
When creating a market cap weighted index, there are 3 main settings to consider: # of Assets, Minimum Asset %, and Maximum Asset %.
Choosing a market cap weighted index means the portfolio will be allocated based on the weight of each asset’s market cap relative to the other assets in the portfolio.
# of Assets sets the number of assets which will be included in the index. The assets included are selected by highest market cap first, progressing to lower market cap assets.
Minimum Asset % determines the lowest allocation percentage that will be assigned to any asset in the portfolio. Due to the market being heavily weighted towards a few high cap assets, this can help prevent your index maintaining extremely small percentage of an asset.
Maximum Asset % configurations are meant to serve as an upper boundary for the maximum risk exposure of a single crypto asset. This prevents a particular asset from consuming more of the index than you would desire.
To create an index that closely follows the market, you can:
- Increase # of Assets
- Decrease Minimum Asset %
- Increase Maximum Asset %
Creating an equal-weighted index is even easier. Instead of having to choose the minimum and maximum allocation percentages, you now only have to select the total # of Assets you would like. Remember to blacklist any assets that you do not want included in your portfolio.
To learn more about the effects of diversifying your crypto portfolio, we recommend reading the articles below that discuss portfolio diversity and optimal asset distribution.
- Portfolio Diversity: A Technical Analysis
- Optimizing Asset Distribution For Cryptocurrency Rebalancing
All crypto portfolios constructed using the Index feature will operate as dynamic index. A dynamic index simple means that the weighting for each asset will be updated before every rebalance period. If an asset increases in price, the percent allocation for that asset in the index can then also increase. In addition to the weightings, if the positions of the assets in your index change, they will also be update. For example, say you created an index which holds the top 10 assets. If the 10th asset by market cap switches with the 11th, this will be updated in the index by removing the previous 10th asset and replacing it with the new 10th asset.
Select a Rebalance Period for your Portfolio
As you’re creating your cryptocurrency index portfolio, you may notice the Rebalance Period option to the right side of the asset selection window. The rebalance period simply means how often a portfolio is rebalanced to its desired asset allocations.
This is where the Shrimpy magic happens. Unlike other automated trading bots which involve complicated technical indicators and signals, Shrimpy follows a simple but straightforward approach of passive management through indexing and rebalancing. Learn more about the rebalancing below.
When deciding on the best rebalance period for your crypto portfolio, consider your risk tolerance to determine the ideal rebalance period. We recommend our studies below that discuss various rebalancing strategies and results.
Once you’ve added your desired crypto assets and allocations, save and activate the portfolio to automatically trigger rebalance events moving forward.
Rebalance your Crypto Index Portfolio
Once you’ve completed setup and activated your crypto index portfolio, head on over to the Dashboard tab. You will be able to perform manual rebalancing events directly through the Dashboard.
Note: You must have an activated portfolio in order to perform any rebalancing events. If you choose to perform a manual rebalancing event, the timer for automated rebalancing events will be reset to the time of the manual rebalance.
Trade & Portfolio History
You can view all changes and trades made to your crypto portfolio under the History tab. The base currency unit can be changed under Settings.
Shrimpy Premium Features
Shrimpy Premium Subscribers receive access to several bonus features within the application. Let’s explore some of the advanced features that can help improve your experience with constructing a crypto portfolio.
Shrimpy Social Leaderboard
Premium subscribers can copy and follow other Shrimpy subscribers’ portfolios and trading strategies. If you’re not sure what type of crypto index to construct, our social leaderboard has some passionate crypto traders open to sharing their trading strategies.
In addition to gaining access to the Shrimpy community, premium subscribers also receive access to Shrimpy Insights. Insights give you an idea of how other Shrimpy users are constructing and managing their portfolio.
Premium subscribers also receive access to Shrimpy’s Backtesting Tool, which lets users analyze performance returns from various asset allocations and rebalance strategies using historical trade data.
Backtesting provides a quick assessment of the viability of a trading strategy by applying it to historic trade data.
Shrimpy is an automated crypto trading & portfolio management tool that lets users automate their crypto portfolio strategy like a traditional index fund. Shrimpy has a consumer application for retail consumers and a Crypto Trading API for developers and advanced traders.
The Shrimpy App is a portfolio management solution for cryptocurrency and digital asset owners. Through its unique indexing and rebalancing engine, Shrimpy lets traders manage their crypto assets similar to that of a traditional index fund. By providing a simple passive management solution, Shrimpy provides users with an effective long-term solution for managing their crypto assets without ever having to trade.
The free version of Shrimpy includes complete indexing and rebalancing features for ALL users. Shrimpy also offers a monthly premium subscription for $8.99/month, which includes:
Shrimpy Social: Follow, communicate, and share strategies with other Shrimpy traders.
Shrimpy Insights: Learn how other Shrimpy users are constructing and managing their crypto portfolio.
Advanced Backtesting: A robust backtesting tool for evaluating custom cryptocurrency portfolio & strategies.
Beyond the consumer app, Shrimpy also offers an API for developers looking to integrate scalable exchange trading functionality into their app.
Shrimpy’s Crypto Trading API was created as a cloud-based solution to address several crypto developer roadblocks including Exchange Trading, Product Scalability, and User Management. With Shrimpy’s API in hand, developers can focus on creating the next era of groundbreaking products that will shape the future of crypto.
Shrimpy’s API is readily compatible with the following exchanges and API endpoints: Binance API, CoinbasePro API, Bittrex API, Kraken API, Gemini API, Poloniex API, Huobi API, KuCoin API, Bibox API, BitMart API, and HitBTC API.
Traders and developers can leverage Shrimpy’s existing trading infrastructure for trading platform/app development instead of having to manage connections to each and every exchange.
Originally published at blog.shrimpy.io.