Crypto Strategy: Accumulation VIA Blacklist (Updated 2019)
There is a never ending list of strategies that are employed by crypto traders. One of the more common strategies is taking profits while the market is up. Setting aside some funds means they are then available for injection back into the portfolio when the market is down. Essentially, the result is selling high and buying low.
Up until this point, the Shrimpy application has not had any convenient way to take profits or accumulate assets. The strategies have been limited to long-term rebalancing strategies which require no interference from users. Although long-term strategies are the main focus of the Shrimpy application, blacklisting has opened up the ability to implement more complex strategies. Advanced users, who are looking for more options, can now apply these techniques to their portfolios.
You can learn more about rebalancing in our previous article:
In order to keep the Shrimpy application as simple as possible, we generally try not to implement features that are specific to a single strategy. Ideally, we would like to provide the tools necessary to construct more advanced strategies, without specifically implementing these strategies. While the features may appear to be separate, they can be combined in clever ways to allow for these complex strategies. The first of these strategies we will discuss is a way to utilize blacklisting for asset accumulation.
What is Blacklisting?
Blacklisting is a simple way of selecting the amount of an asset that should be ignored when calculating trades. Whether it’s only a portion of the entire asset balance or the total asset balance, the amount that is blacklisted will be ignored when rebalancing or allocating a portfolio. In the Shrimpy application, this amount will still be visible on the dashboard, so you can still see the full overview of your portfolio.
There are times where you may want the entire asset to be blacklisted. No matter how much of the asset you own, you don’t want any of it to be considered for trades.
If this is the case for you, simply specify an amount that is so large that you will never have so much. Entering a large value will make Shrimpy always keep the total amount in that asset as a blacklist.
Example: You don’t want to ever sell LTC.
Solution: Blacklist 100,000,000 LTC.
You now have a complete blacklist of LTC since it’s impossible to have 100,000,000 LTC. The number you chose doesn’t need to be as large as 100,000,000 LTC, just larger than the amount you ever plan on owning.
Specifying a percent allocation in your portfolio for an asset which is completely blacklisted will cause Shrimpy to continuously buy that asset during each rebalance. This will continue until your ENTIRE portfolio is in that single asset. The reason Shrimpy will do this is because it completely ignores the full amount of that asset. So during a rebalance, Shrimpy will check your blacklisted asset and conclude you have NONE of that asset. Since you selected to have a percent of that asset, Shrimpy will then buy MORE so you have the correct allocation. However, during the next rebalance, it will do the same process again. It will check how much you have of that asset, which will be NONE again (since it’s completely blacklisted). This process will continue to happen every rebalance until you have ONLY the blacklisted asset.
For this reason, use the complete blacklist feature with caution. Unless you want to continuously buy more of the asset during each rebalance, don’t blacklist the entire asset AND allocate a percentage for the asset in your portfolio. Also, if you want to slowly buy the asset more and more over time, you can completely blacklist the asset and then add a small percentage, like .5%. That way only a small amount of your portfolio is traded to the blacklisted asset each rebalance.
Example: You have 100 BTC and 100 LTC in your portfolio. You completely blacklist LTC and specify 50% BTC and 50% LTC as your allocations.
Result: Every rebalance, half of your BTC will be sold to LTC until you don’t have any BTC left and only have LTC.
If you don’t want this accumulation to happen, don’t allocate a percent for the assets which are completely blacklisted.
There are also times when you may not want the entire balance of the asset to be blacklisted, just part of the balance. In this situation, we want to use a partial blacklist.
By specifying only some of an asset to be blacklisted, this will remove only that amount from being rebalanced.
Example: You have 1 BTC. However, you want .5 BTC to be ignored.
Solution: Type in a blacklist for .5 BTC.
Partial blacklisting will ignore the amount specified, the rest will be traded normally. Both amounts will show up on the Shrimpy dashboard.
Similar to the complete blacklist, the allocation amount matters when dealing with blacklisting. Since the amount that is blacklisted is completely ignored, the remaining BTC balance is what Shrimpy considers when calculating the allocations during a rebalance. That means the remaining amount will be bought or sold to reach the target allocation specified for your portfolio.
Example: You have a total portfolio value of 1 BTC, an allocation of 50% BTC / 50% LTC, and a blacklist for .5 BTC.
Result: Shrimpy will trade so you have .25 BTC worth of LTC and .75 BTC.
In this example, you can see how since there is a .5 BTC blacklist, the remaining assets were divided evenly between LTC and BTC. This is because Shrimpy trades as if you only have .5 BTC worth of assets.
Exclude Offline from Rebalancing
The rules for blacklisting also apply for the balances that are input into the “Cold Storage” feature in Shrimpy. Either part of the amount or the entire amount can be blacklisted. If you have assets in cold storage and on the exchange, the way Shrimpy calculates which balances to ignore is by first blacklisting the amount that is in “Cold Storage”, then it blacklists the amounts that are on the exchange. This allows Shrimpy to still actively trade the amount on the exchange if it needs to buy are sell those amounts.
Example: You blacklist .5 BTC. You currently have .25 BTC entered into the wallets tab and .5 BTC on the exchange. (So, a total of .75 BTC)
Result: Shrimpy will first blacklist the .25 BTC which is not on the exchange. Since there is still .25 BTC left over in the blacklist, Shrimpy will blacklist .25 BTC from the exchange. The result is .25 BTC that is liquid on the exchange.
This allows the blacklisting of both assets held on the exchange as well as those entered into the wallets tab in Shrimpy.
The Shrimpy application doesn’t specifically support this feature, but there is a trick we could use in order to accumulate assets on Shrimpy by taking advantage of the blacklisting feature!
Whether you are a BTC maximalist or simply want to take profits whenever the market moves upwards, Shrimpy now has a new feature that can work for you.
We all know that blacklisting allows you to specify which assets Shrimpy should ignore during trades. This can also be set so that only part of an asset is not traded. If you wanted to blacklist .5BTC of 1BTC, it will only trade as if it has .5BTC available for rebalancing.
Blacklisting can also be used for another function; accumulation. This is done by inputting a blacklist while still maintaining an allocation percentage.
Example: Set an amount you would like to accumulate in USDT. We can use 100 USDT for this example. Next, set a small percent allocation of USDT. We can use 1% in this example.
Result: Every rebalance will buy USDT until you own 100 USDT + 1% of your total portfolio in USDT. Then, raising the USDT blacklist to 200 USDT, will accumulate more USDT.
The steps to accumulate an asset are then reduced to these 4 simple steps.
Step 1: Blacklist an asset you wish to accumulate.
Step 2: Allow assets to deviate.
Step 3: Rebalance in order to accumulate more of the blacklisted asset.
Step 4: Increase the blacklisted amount.
We can visualize these steps by illustrating how blacklisting would look in an active portfolio on Shrimpy.
Conversely, a bear market will allow the opposite. If you have been accumulating assets for some time and you now want to inject funds back into your portfolio since there is a bear market, you can do the opposite of the above steps. You will perform the opposite of the steps, as follows:
Step 4: Un-blacklist some of the blacklisted asset.
Step 3: Rebalance to inject funds into your portfolio.
Step 2: Allow assets to deviate.
Step 1: Un-blacklist more of the asset
Repeat this process as you want to distribute more funds into your portfolio.
You now have an effective system to accumulate an asset. When the market goes up, you can accumulate the base asset (USD for example). Then, by resetting the blacklist to a slightly higher value, those gains are locked in. When the market goes down, you can then utilize the excess USD to inject funds into the rest of the portfolio. This process can be continued as the market oscillates.
Buy low; sell high.
Shrimpy is introducing two different things with the release of blacklists. The first is the ability to simply exclude assets from rebalancing. This means that users can now have an amount either on the exchange or in an external wallet that is excluded at the time of rebalancing.
The second thing this release introduces is the ability to accumulate via blacklisting. While this strategy may be more advanced, it presents an opportunity for users that was previously not available on Shrimpy. It allows users to add intricacies to their strategies if they desire, without affecting the general usability of the application by over complicating the UI for newer users.
Disclaimer: Assets and strategies mentioned throughout this article are for example purposes only. It is not intended to be investment advice.
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Leave a comment to let us know your thoughts on blacklisting assets!
The Shrimpy Team