Welcome to the best HODL crypto long-term investment strategy for beginners in 2022.
This article will guide you on how to earn interest on cryptocurrency in 2022. we believe it´s essential to not just HODL but also invest in cryptocurrency to make interest and crypto passive income.
Why is this important?
Well, if you don´t earn the possible interest rate on your cryptocurrency, someone else will make it, and you will pay for it.
So, why should you just HODL when you can invest your cryptocurrency to earn interest and passive income?
First, you need to have cryptocurrencies to invest in. Otherwise, we recommend this guide on how to buy your first cryptocurrency.
No Financial Advice, Information only. Do your own research
Intro - Crypto Investment for Beginners 2022
Before you invest in cryptocurrencies you should be aware of some facts.
Crypto as a high-risk and a volatile investment
Cryptocurrencies are a high-risk investment. This is because they are volatile and unregulated. Volatile means that they go up and down in value. Crypto is volatile because there is still a lot of leveraged capital in the market.
In addition, many retail investors tend to speculate and are driven by short-term feelings rather than long-term value, like institutional investors.
Crypto regulation and insurance
Cryptocurrencies are an unregulated market, so frauds, Ponzi schemes, and scams can operate more efficiently.
In addition, cryptocurrencies are not covered by any government insurance like FDIC deposit insurance.
However, the market has matured over the last few years, and there are companies with private insurance and custodial services. Also, most crypto exchanges have historically paid back any losses due to hacks (Examples are Binance, Bitfinex, Crypto.com, and more). Read more about regulated and safe crypto interest accounts.
Cryptocurrencies create taxable events
You create a taxable event if you sell, trade, or use cryptocurrency to purchase any goods or services.
If the cryptocurrency has appreciated since yo acquired it, you will probably have tax obligations to pay after a taxable event. Read more about how crypto interest payouts are taxed and reported.
Crypto HODL strategy
A crypto strategy called HODL (hold on for dear life) means that you never should sell your crypto. This has additional advantages since you never create any taxable event if you just HODL. Read more about crypto portfolio allocation strategy.
Buy Crypto Investment for Beginners 2022
As a crypto beginner, you should follow these easy step-by-step guides.
1. What crypto exchange should I sign up with as a beginner?
Make sure to find a reputable crypto exchange supporting your country’s fiat deposits. We have listed the best altcoin exchanges with reviews.
2. Which crypto should I start buying as a beginner?
If you are a complete beginner, buy Bitcoin BTC or Ethereum ETH. These have a lower risk than another crypto because they have a larger market cap and a more extended history.
If you have fulfilled your ETH and BTC portion of your portfolio, you can check cryptocurrencies in the top 1-15. For example, Avalanche AVAX, Cardano ADA and Solana are hot with a lot of developing activity. Read more about diversification further down.
3. How much should I invest in crypto as a beginner?
Make sure to buy for a small amount the first time you buy into crypto. Also, make sure to buy on several occasions with a smaller amount rather than buy for all your savings on one occasion.
Doing so minimizes the risk of entering the crypto market at ATH (all-time high).
Earn Interest and Passive Income on Cryptocurrencies
Now, when you have bought crypto and have them at an altcoin exchange, you want to generate an income from them.
The best-listed crypto exchanges have passive income possibilities on specific cryptocurrencies. In addition, you can deposit into a specialized crypto lending and borrowing company to earn interest on your crypto holdings.
There are several different ways to earn passive income from cryptocurrencies. At Cryptocoinzone, we will list the following.
- Interest accounts
- Staking rewards
However, other alternatives include yield farming, margin funding, and more. We have tried those as well, but we have found it most convenient to use interest accounts and staking rewards for the moment.
Cryptocurrency Interest Accounts and Sign Up bonuses
A cryptocurrency interest account is where you deposit your cryptocurrency to earn interest.
This is an entirely passive income source.
Usually, your funds are used to lend out to borrowers to generate interest. Also, some actors use the funds for different Defi liquidity mining pools. Midas Investment is a company transparent about focusing on Defi yields. Read more in our Midas Investment review.
Some of the companies we list offering cryptocurrency interest accounts and sign-up bonuses are listed in the table below. See all the best crypto interest rates and staking rewards.
Cryptocurrency Proof of WorkRewards
There is no obvious way to earn yield on a proof-of-work network in contrast to a proof-of-stake network.
For a proof-of-work network, you will have to either
- Deposit your altcoin or Bitcoin to a 3rd party service generating a yield for you
- Wrap your Bitcoin into Defi and find a web application offering a yield on wrapped Bitcoin
Read more about the best Bitcoin BTC interest rates APY.
Cryptocurrency Proof of Stake Rewards
Cryptocurrency staking rewards are generated from proof-of-stake protocols. There are numerous proof-of-stake protocols out there and to mention a few
Here, you can stake your coins to earn staking rewards. At Cryptocoinzone, we list different 3rd parties offering to stake as we have found this the most convenient way to bet for the moment. Also, this is less technical, but you have to pay a more significant fee.
Where can I get compound crypto interest?
You can get compounding interest by deposit to the following crypto companies
- NEXO offers daily compound payouts
- BlockFi offers monthly compound payouts
Daily compound interest payouts is best for you since you start earninareinterest on your earned interest almost immediately. Read more about the NEXO wallet review with loyalty levels and interest rates.
What are the risks associated with investing cryptocurrency to earn interest and passive income?
Of course, we must discuss the risks involved when investing in cryptocurrencies to get interested and earn passive income.
As for any investment, there are risks associated with investing in cryptocurrencies. On top of the risks associated with cryptocurrencies, there is often an additional risk with interest accounts since it usually involves a 3rd party.
Let´s start to identify and address the risks.
What are the cryptocurrency investment risks?
Here, we will focus on the risks associated with the interest products which will generate interest on your cryptocurrency holdings.
However, don´t forget that there are also risks associated with the cryptocurrencies itself since they are unregulated financial assets.
When you deposit your cryptocurrencies, or HODL, on a 3th party service, like an exchange there are certain risks you should be aware of. Here, we list some of the major risks associated with storing your cryptocurrencies on an exchange or with any other 3th party service
- The 3rd party service can be a scam.
- The 3rd party service can be legit but fail due to bad business
- Regulators can shut down the 3th party service
- The 3rd party service can be hacked
How to minimize the cryptocurrency investment risks?
So, how can you minimize risks when investing in cryptocurrency to earn interest and passive income?
First, information is KING when it comes to minimizing risks. The more information you get, the better decision you can make.
However, information can be limited and manipulated, so diversification is another risk minimization source.
Let´s break this down into diversification and over-diversification.
What is cryptocurrency diversification?
What does it mean to diversify your cryptocurrency investments?
Did you ever hear the famous term “don´t put all your eggs in one basket”?
If you drop that basket all eggs will crush and you will be left with nothing.
The same risk diversification can be applied to cryptocurrency investments.
- Don´t put all your money into one cryptocurrency.
- Don´t put all your cryptocurrency in one wallet or one exchange
- Don´t put all your fiat into cryptocurrency
- Don´t put all your fiat into the cryptocurrency market at one specific time.
Fine, but you overdo it? Can you over-diversify your cryptocurrency portfolio?
What is cryptocurrency over-diversification?
Now, you have learned how to diversify your cryptocurrency portfolio. However, can you do too much diversification?
The simple answer is:
Yes, you can.
Why or how?
Well, imagine yourself buying every cryptocurrency out there. Not only would it be an administrative nightmare for your crypto tax file, but also it would
- Cost you a lot of spreads
- Cost you a lot of exchange fees
- Give you a lot of jobs to keep track of all cryptocurrencies
- It will not give you an advantage over the overall crypto market
You certainly will hit those extreme home runs, but you will also catch every cryptocurrency that fails completely.
Everything about investments is to beat the market.
Again, how do you beat the market?
->Knowledge, information, and handle your fear and greed.