Welcome to the best HODL crypto long-term investment strategy for beginners 2022.
In this article, we will guide you on how to earn interest on cryptocurrency in 2022. we believe it´s important to not just HODL but also invest cryptocurrency to earn interest and earn crypto passive income.
Why is this important?
Well, if you don´t earn the possible interest rate on your cryptocurrency someone else will earn 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, 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. They are volatile and unregulated. Volatile means that they goes up and down in value. The reason why crypto is volatile is because there is still a lot of leveraged capital in the market. In addition, there are many retail investors which 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 which means that frauds, Ponzi-schemes and scams can operate more easily.
In addition, cryptocurrencies are not covered by any government insurance like the FDIC insurance.
However, the market has matured over the last few years and there are companies with privates insurances and custodial services. Also, most crypto exchanges have historically paid back any losses due to hacks (Examples are Celsius, Binance, Bitfinex, Crypto.com and more). Read more about regulated and safe crypto interest accounts.
Cryptocurrencies create taxable events
If you sell, trade or using a cryptocurrency to purchase any good or services, you create a taxable event.
If the cryptocurrency has appreciated in value 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
There is a crypto strategy called HODL (hold on for dear life) which 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 guide.
1. What crypto exchange should I sign up with as a beginner?
Make sure to find a reputable crypto exchange that support fiat deposits from your country. We have listed the best crypto exchanges.
2. Which crypto should I start buying as a beginner?
If you are a complete beginner, buy Bitcoin BTC or Ethereum ETH. These have lower risk compared to the other crypto because they have a larger market cap and a longer 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, Terra LUNA 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 at several occasions with smaller amount rather than buy for all your savings at one occasion.
By doing so, you minimize the risk to enter the crypto market at ATH (all time high).
Earn Interest and Passive Income on Cryptocurrencies
Now, when you have bought crypto and you have them at an exchange you want to generate an income from them.
The best crypto exchanges we have listed also have passwive income possibilities on certain 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, there are other alternatives like yield farming, margin funding and more. We have tried those as well but we have find 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 a completely 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.
Some of the companies we list that are offering cryptocurrency interest accounts and sign up bonuses are listed in the table below.
Crypto.com Referral Code: mcmk7qgbhh
Celsius Network Code: 187146807e
Cryptocurrency Proof of Stake Rewards
Here, you can stake your coins to earn staking rewards. At Cryptocoinzone we list different 3th parties offering staking as we have found this the most convenient way to stake for the moment. Also, this is less technical but you have to pay a bit larger 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
- Celsius offers weekly compound payouts
- BlockFi offers monthly compound payouts
Daily compound interest payouts is best for you since you start earning interest on your earned interest almost immediately. Read more about 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 need to discuss the risks involved when investing cryptocurrencies to get interest and earn passive income.
As for any investment, there are risks associated with investing with cryptocurrencies. On top of the risks associated with cryptocurrencies there is often an additional risk with interest accounts since it usually involves a 3th 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 3th party service can be a scam
- The 3th party service can be legit but fail due to bad business
- The 3th party service can be shut down by regulators
- The 3th party service can be hacked
How to minimize the cryptocurrency investment risks?
So, how can you minimize your risks when you invest in cryptocurrency to to earn interest and passive income?
First, information is KING when it comes to minimize risks. The more information you got the better decision you can take.
However, information can be limited and also manipulated so another source for risk minimization is diversification.
Let´s break this down to 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 for cryptocurrenccy invetments.
- 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 on one specific time
Fine, but you 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 to 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 administration night mare 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 job to keep track of all cryptocurrencies
- 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 single cryptocurrency that completely fails.
In the end of the day, everything about investments are to beat the market.
Again, how do you beat the market?
->Knowledge, information and handle your fear and greed.