5. Strategy Trading Series - HODL Earn

Introduction:

We often have this speculation:

In bull markets, there are many digital assets with significant gains. If we could continuously capture assets with large increases, such as catching a doubled digital asset every month, then after one year your assets would become 2 to the power of 12, that is, 4096 times. This is very impressive, of course this is also almost an impossible task to complete, because it is difficult for us to continuously catch surging assets.

This is also a problem many users encounter:

In bull markets, although many assets are rising, the rotation pattern of assets is difficult to predict. We don't know which asset will rise next. The most common situation is that the digital assets we hold are mostly in a volatile market, watching other assets surge, and then when it's our held assets' turn, they surge for a wave but don't make new highs, stopping at high levels. In a bull market, this kind of operation yields very limited returns and wastes many opportunities.

In bear markets, many assets will fall. If you just hold a few cryptocurrencies without moving, you may encounter sequential declines in assets, continuous shrinking of market value without any response measures, and can only endure the risk of the bear market, unable to balance the risk level of the overall position through position management.

At this time, you can consider the HODL Earn strategy, because it has an intelligent rebalancing mechanism.

1. What is HODL Earn

HODL Earn strategy is an automated strategy that performs intelligent dynamic rebalancing among the asset portfolio selected by users. Two dynamic rebalancing modes - scheduled rebalancing and ratio rebalancing - help maintain constant proportions of each asset in users' HODL portfolios. This strategy is mainly designed to help users HODL assets for the long term, but not simply long-term holding. It can also use exchange rate fluctuations between different assets to earn coins.

2. Rebalancing Principle of HODL Earn

The rebalancing principle of HODL Earn can refer to the All-Weather strategy of Bridgewater Associates, the world's largest hedge fund.

In traditional financial markets, the main factors affecting asset prices ultimately come down to two - economic growth and inflation. This brings 4 economic environments, and the economic cycle continues to rotate. Theoretically, if you can accurately predict the macroeconomic cycle and time the market accurately, then adjusting the allocation ratio of different major asset categories on time can obtain ultra-high returns, not only can navigate through bull and bear markets, but even create ultra-high return rates! But the problem is, how to predict the macro cycle in advance? Countless people have tried this, but the results are not optimistic. Wall Street's painful data shows that humans do not have market timing ability and cannot accurately predict macro cycles. This is also the problem encountered by digital assets users: how to find the pattern of asset rotation?

Ray Dalio's approach is: don't predict the macro cycle! Instead, build an All-Weather strategy based on asset allocation philosophy to navigate through bull and bear markets and smoothly weather every macro cycle. The core logic of the All-Weather strategy is to equally distribute risk across each asset category; and in different growth and inflation environments, there will always be assets that perform well, and the investment portfolio will never be exposed to the same risk factor. Use assets with different preferences for different environments to balance the investment portfolio configuration. Simply put, buy some of all major assets, if one doesn't rise another will, and then through rebalancing strategy, adjust asset position ratios. Currently Bridgewater manages $126 billion in funds and is the world's largest hedge fund.

Therefore, the HODL Earn strategy is also: select a basket of assets, don't predict asset rises and falls, and then through rebalancing strategy, achieve risk balance and higher returns. The rebalancing strategy tells us to regularly review your asset position ratio situation, then convert assets that have risen more into assets that have risen less, thereby making their relative ratios return to the initial ratio.

For example: when a user sets BTC and ETH holdings at 50%: 50%, initial holdings are 1000 USDT each. If ETH rises faster, BTC is 1100 USDT, ETH is 1300 USDT, then 100 USDT of ETH will be sold to buy BTC, making BTC and ETH holdings both become 1200 USDT, keeping the position return to the initial ratio of 1:1.

If BTC's market value ratio soars significantly, you can appropriately reduce the account's BTC holdings and exchange for some quality mainstream coins, but this is often in a big bear market. People always sell other assets to return to BTC, while the rebalancing strategy is exactly the opposite. The operation goes against human nature, but returns are higher than simple HODLing.

3. Scenarios for Using HODL Earn

If users are bullish on multiple assets simultaneously and are willing to hold tokens long-term to gain appreciation, they can use the HODL Earn strategy. The intelligent rebalancing function can help users obtain excess returns. The HODL Earn strategy is very suitable for new users who don't have time to monitor the market, and also suitable for experienced users and institutions to automatically adjust investment portfolio configuration ratios when HODLing, using exchange rate fluctuations between tokens for rotation arbitrage.

Although the digital assets industry is not like traditional financial markets with very obvious price cycles, asset rotation phenomena often occur - several assets rise and then start to pull back, while several other assets begin to rise. If you just hold assets without moving, it's very likely that profits will be given back due to price pullbacks of surging assets. If users take profits on assets that rose first, while buying other potential assets, not only are profits locked, but holdings of potential assets are increased. Cycling this way can capture excess returns of this investment portfolio.

4. How to Use HODL Earn

Web: Click Trading, select Strategy Trading, and choose HODL Earn in the strategy list.

You need to fill in:

1. Asset Configuration: The asset portfolio you want to hold long-term, determine the corresponding market value ratio for each asset, up to 10 assets can be combined, currently only supports USDT-denominated pair combinations.

2. Rebalancing Mode: Ratio rebalancing and Scheduled rebalancing

Ratio rebalancing: Triggers rebalancing according to the change ratio of asset market value. The system defaults to 3% and 5% ratio options. When the set threshold is exceeded, rebalancing is triggered, checking position ratios every 5 minutes.

Scheduled rebalancing: Detects deviation degree and triggers rebalancing according to a fixed time cycle. After the preset time cycle interval, detects whether the market value ratio of one or more assets deviates from the preset ratio by more than the set threshold (default is 3%), then triggers rebalancing.

3. Investment Amount: The amount of funds invested in HODL Earn, which will be traded and converted into assets in the portfolio after investment.

For example, in the above example, referring to the All-Weather fund's rebalancing strategy, you can set: BTC, 45%; ETH, 30%; DOT, 10%; OKB, 10%; FIL, 5%. In this asset allocation, BTC has relatively the smallest risk and highest position; followed by ETH, the king of public chains.

5. Important Notes

1. After the HODL Earn strategy is created, invested funds will be isolated from the trading account and used independently in the strategy. Therefore, users need to pay attention to the risk brought to the overall position in the trading account after funds are transferred out.

2. If corresponding assets in the user's set HODL Earn strategy are delisted, users will be reminded by email and the strategy will be paused when delisted. If users need to continue HODL Earn operations, they can manually start it; if users do not take action, the corresponding HODL Earn strategy will stop.

Currently OKX Web has launched Strategy Square, enriching strategy types to meet various investment needs, and also supports one-click copying of expert strategy parameters. You can enter Strategy Square here and start your strategy trading journey.

Key Points of This Issue:

Disclaimer

This article may contain product-related content not applicable to your region. This article is committed to providing general information only and is not responsible for any factual errors or omissions therein. This article represents only the author's personal views and does not represent the views of OKX. This article is not intended to provide any of the following advice, including but not limited to: (i) investment advice or investment recommendations; (ii) offers or solicitations to purchase, sell or hold digital assets; or (iii) financial, accounting, legal or tax advice. Holding digital assets (including stablecoins) involves high risk, may fluctuate significantly, and even become worthless. You should carefully consider whether trading or holding digital assets is suitable for you based on your financial situation. For questions about your specific situation, please consult your legal/tax/investment professional. The information appearing in this article (including market data and statistics, if any) is for general reference only. Although we have taken all reasonable precautions in preparing these data and charts, we assume no responsibility for any factual errors or omissions expressed herein. © 2025 OKX. This article may be reproduced or distributed in full, or excerpts of 100 words or less of this article may be used, provided such use is non-commercial. Any reproduction or distribution of the entire article must also prominently state: "This article is copyrighted © 2025 OKX, used with permission." Permitted excerpts must cite the article name and include attribution, such as "Article Name, [Author Name (if applicable)], © 2025 OKX". Some content may be generated or assisted by artificial intelligence (AI) tools. Derivative works or other uses of this article are not permitted.

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