Determine your earnings with daily compound interest using our crypto APY calculator. While numerous options exist for holding and growing your cryptocurrency, only a select few offer the benefit of compound interest. This method amplifies profits compared to standard interest, leading to higher crypto returns.
👉 Maximize your crypto gains with our APY calculator
How to Calculate APY & APR in Crypto
Calculating APY (Annual Percentage Yield) and APR (Annual Percentage Rate) in crypto follows traditional finance principles but adapts to crypto-specific contexts:
APR Calculation
- Represents the annualized interest rate without compounding.
Formula:
APR = (Interest Earned / Principal) × (Days in a Year / Duration Interest Earned)Example: Earning 0.01 ETH from a 1 ETH deposit in 30 days yields:
APR = (0.01 / 1) × (365 / 30) ≈ 12.17%
APY Calculation
- Accounts for compounding interest.
Formula (Periodic Compounding):
APY = (1 + r/n)^(n*t) – 1Where:
r= periodic interest raten= compounding periods per yeart= time in years
Example: 12% APR compounded monthly:
APY = (1 + 0.12/12)^(12*1) – 1 ≈ 12.68%
Key Definitions
What is APY?
Annual Percentage Yield: Reflects total interest earned/owed over a year, including compounding effects.
- Example: 100 USDT at 5% APY = 105 USDT after one year.
What is APR?
Annual Percentage Rate: Represents borrowing costs or investment returns without compounding.
- Common in credit products (e.g., loans, mortgages).
APY vs. APR: Key Differences
| Factor | APY | APR |
|------------------|----------------------------------|----------------------------------|
| Compounding | Includes compounding | Excludes compounding |
| Use Case | Investments, savings | Loans, credit products |
| Accuracy | Higher (reflects actual growth) | Lower (base rate only) |
👉 Compare APY vs. APR for your portfolio
Why Is Crypto APY Higher Than Traditional Finance?
- Risk Premium: Crypto’s volatility justifies higher yields.
- Early Adoption Incentives: Platforms attract users with competitive rates.
- Operational Efficiency: Decentralization reduces costs, enabling better rates.
- Yield Farming: Additional token rewards boost APY.
Compound Interest Explained
Compound interest calculates earnings based on initial deposit + accumulated interest. Example:
- Non-compounding: $100 at 5% = $5/year.
- Compounding: $100 at 5% (monthly) ≈ $5.12/year.
Impermanent Loss in Crypto
Occurs when liquidity providers withdraw assets at a different ratio than deposited due to price changes.
Calculation Example:
- Deposit: 50 Token A + 50 Token B ($100 total).
- Withdrawal: 40 Token A + 60 Token B ($100 total, but Token A’s value rose).
How to Earn Staking Rewards
- Deposit crypto into a staking platform/wallet.
- Choose lock-up periods (longer durations often yield higher APY).
- Monitor rewards with a staking calculator.
FAQ
1. How often is interest compounded in crypto?
Most platforms compound daily or monthly, boosting APY.
2. Can I lose money staking crypto?
Yes, via impermanent loss or platform risks (e.g., scams).
3. Is high APY sustainable?
Not always—research the platform’s revenue model.
4. What’s the best staking lock-up period?
Balance liquidity needs with higher APY offers (e.g., 3–12 months).