Passive vs. Active Investing

There are two broad schools of thought when it comes to investing.

The first is passive investing. Passive investors diversify their portfolio across the entire market, usually by means of a low-cost index fund.

They don't try to beat the market. Instead they try to capture the risk & return profile of the entire asset class.

The second is active investing. Active investors use technical or fundamental indicators in an attempt to beat the average market performance.

HodlBot supports both investing styles.

The HODL20 Index - Passive Investing

HODL20 historical backtest

The HODL20 attempts to capture the risk and return of the entire cryptocurrency market. It takes the top 20 coins and assign each coin a % allocation based on their weighted market capitalization.

Then it caps 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%.

We update the index every day based on new market cap data.

Gist available here

HODL 20 Allocation as of March 25, 2018

Above is the HODL20 allocation as of March 25, 2018.

Here is a quick measures of how effectively it captures the market:

The HODL 20 makes up ~87% of the cryptocurrency market. For comparison the S&P 500 represents ~75% of the US stock market.

Over a 3 year period, Bitcoin was up by a factor of 42x. HODL 20 with no rebalancing was up a factor of 51x and the HODL 20 with monthly rebalancing was up a factor of 164x.

Rebalancing Periods for the HODL20

We update the index every day based on new market cap data.

By default, HodlBot rebalances your portfolio every 4 weeks to keep it consistent with the HODL 20 index.

We settled on 4 weeks as an appropriate rebalancing period, as longer periods do not track the market effectively while shorter periods incur higher transaction costs.

You can customize this rebalancing period to be anything you like.

There is some material floating online suggesting that more frequent rebalancing with cryptocurrencies is always better. We strongly disagree with that finding.

Rebalancing is a well-researched area of finance. The consensus from academic literature states that more frequent rebalancing isn't always better. In fact, rebalancing can be worse than doing nothing at all for drifting markets. To read more about rebalancing, click here.


We realize that some of our users may really despise a coin within the top 20 by market cap.

When you blacklist a coin, HodlBot will not purchase the coin. For the HODL20, HodlBot will replace it with the next highest coin by market cap.

You can find the blacklist feature in the settings tab, under account.

By default, we've blacklisted all stablecoins in the top 20, since they are by definition supposed to be stable and not change in price.

Blacklist example

Create Your Own Portfolio - Active Investing

If you're not happy with the HODL20, HodlBot can help you create your own portfolio.

Click over to the portfolios tab, to see all of your saved portfolios. To create a new one, simply hit the plus button.

browse all of your portfolios on HodlBot.

Begin by selecting what coins you'd like to hold, and setting their relative weights to each other.

Once you have something interesting, you can run a historical backtest with HodlBot to see how this portfolio would have performed over time.

create your own portfolio with HodlBot. Select what coins you want and then backtest

When you're ready to create your portfolio, create a name and description for your new creation, and save it.

Once you navigate back to the portfolios tab, you can make this new portfolio you've created your active strategy.

A Few Notes on Create Your Own Portfolio

Blacklist won't work on custom portfolios. If you have a coin in your own custom portfolio, we'll assume you actually want it.

You can only run one strategy at a time. If you're running a custom portfolio, you won't be able to have the HODL20 index, or another custom portfolio strategy.

You can customize rebalancing period for custom portfolios the same way.