Crypto Compound Interest Calculator
Calculate daily compound interest and know how much you will earn. There are plenty of options for holding and earning cryptocurrency, but very few of them will let you earn compound interest. Compound interest is a great way to maximize your profits compared with non-compounding interest, resulting in more cryptocurrency in your pocket.
A daily compound interest calculator crypto can make it easy to figure out how much you will earn with compound interest. But you should still understand what this type of interest is.
At the end of the compounding process you will earn 0.0000 more tokens.
Calculate Your Interest On Crypto With a Crypto APY Calculator
The most straightforward way to calculate your yield based on APY is to multiply the value by your principal. If you want to break down your overall APY into specific time frames (e.g. one week), here’s an easy formula to calculate how much interest you’re earning every 30 days on a 5% APY 30-day plan, with an initial deposit of 1,000 USDT.
Interest = (Principal X APY / 365) X Period
Interest = (1,000 X 0.05/365) X 30
Weekly interest ≈ 4.10 USDT
This means if you withdraw your funds after a week, you’ll only receive around 4.10 USDT in interest, as you wouldn’t enjoy the compounding effect of your interest being added to your balance. On the other hand, if you don’t withdraw your funds for a year, your interest will be added to your balance weekly and the interest paid on your updated will keep increasing over the course of the year.
What is APY?
APY is your annual return on an investment that takes into account compound interest that is accrued on top of your initial investment. This means you’ll earn interest on the initial investment, as well as interest earned on that interest.
Example: If you invest 100 USDT at 5% APY in a crypto interest account, you’ll earn 105 USDT at the end of one year from the deposit date.
What is APR?
APR is the first thing a borrower wants to know. In most cases APR is the percentage on a loan product, i.e. the price one has to pay on a monthly basis in order to get the loan. It’s calculated as:
APR = Periodic Rate x Number of Periods in a Year
Banks usually feature APR for their credit products such as cards or mortgage loans. If you are a borrower, you would be interested in the lowest possible APR, which means that the loan is the least expensive.
What’s the Difference Between APY & APR?
Simply put, APY is about making money through lending, and in contrast, APR is about spending it through borrowing.
If you’re on the lending side, whether through P2P or through investing in a savings account, you would be looking for the highest APY, as that means you’ll be earning the highest yield on your investment. However, your APY on deposit accounts may fluctuate with the market, so make sure you stay on top of any rate changes.
If you’re on the borrowing side, you’d be looking for the lowest APR, as that means you’ll be paying less interest on your loans. If your APR rate is fixed, it is unlikely to change. However, if you’ve signed up for a loan with an introductory APR, you’ll need to check how long it will last and what your rates will be once the introductory rate ends.
APRs also reflects the simple interest rate over a year, while APY covers the compounding of interest, where you earn interest on your interest.
What's the Difference Between APY & Interest Rate?
Interest rate is the amount that your investment will increase by over a period of time – for example a week, month or year. This increase may also be counted on the previous increases your investment has accrued, but that will vary. APY is similar – it is also how much your money will increase by – but this is the most accurate measure as it is over a year, and takes compounding into account.
Why is the APY High in Crypto vs Traditional Finance?
APY in traditional banks is considerably lower than that offered by crypto wealth management platforms such as Cabital. There are numerous reasons for that:
- APY at traditional banks or online banks is lower than in the crypto space. Bank savings accounts offer 0.28% on average as loans are issued at 2 to 3%. In crypto, especially cryptocurrency savings accounts, APY can reach 6%, as loans are issued at 5 to 8% on average.
- Fewer regulations and higher volatility drive APR in crypto upwards. The exact APR depends on the type of cryptocurrency and its capitalisation, and this, in turn, pushes the APY upwards.
- As a general rule, interest rates in crypto are dictated by many institutional players active in the area. Higher APR and APY come from bigger risks and bigger profits associated with the space. Cryptocurrency exchanges sustain this trend by offering loans at similar rates.
What is Compound Interest?
You do not need to understand compound interest to use a Bitcoin compound interest calculator and see your potential profits. However, it is still wise to have some basic understanding. After all, you should know why compound interest is so great for maximizing your passive earnings.
A Basic Definition:
Compound interest is when you earn interest calculated based on the deposit and past interest. This contrasts with non-compounding interest that only considers the initial balance when being calculated.
What is Impermanent Loss?
Impermanent loss is incurred when liquidity providers receive different amounts of assets upon withdrawal compared to when they first deposited them into a liquidity pool on an automated market maker (AMM) such as Uniswap or Sushiswap. This is due to changes in token price, which affects the composition of the liquidity pool, resulting in you having slightly less or more of a particular token.
For example, even if you deposited your assets at a 50:50 ratio at the start, there is no guarantee that you will receive the same amount of each asset in the end. This may result in liquidity providers receiving a lower value of assets than if they just chose to hold the tokens in their wallet instead.
How to Calculate Impermanent Loss?
Now that you’ve understood how impermanent loss occurs, how do you calculate exactly how much you’ve lost from providing liquidity? If the price of the assets in a pool changes by a certain amount, the total value of your deposits will be affected, and we can simply plot these results on a graph. Since we are talking about the price change, it does not matter whether the price of the assets goes up or down, as you would still be better off holding the assets instead.
Depending on the amount of liquidity as well as the trading activity associated with a particular liquidity pool, depositors can generate a positive return if the earned fees exceed their impermanent loss or not at all. These fees that depositors can expect to receive are usually represented in percentage form, otherwise known as the APY.
How to Earn Staking Rewards
Making a profit with crypto staking is straightforward. All you need to do is deposit your cryptocurrency in/on the appropriate wallet or platform and wait for the results come through.
If you want to maximize your profit, however, you should pay attention to the interest rates offered and use a crypto staking calculator to see if you are happy with the potential rewards. Remember that you cannot use your cryptocurrency during staking.
What to Know Before Staking
While the act of staking your Bitcoin, Ethereum, or USDT is straightforward, there are a few important things to know ahead of time.
That Your Platform Is Reputable
As mentioned, you should always make sure that you choose a staking platform with a good reputation. This will protect your funds and help guarantee you get your advertised staking rewards.
To evaluate the reputation of the platform, check out reviews. You should also look at its history, including the history and experience of its team members.
This is also ideal to see how the platform earns crypto to pay you interest. The platform should have a reliable, proven effective method and not be too risky.
Every staking system works slightly differently. Some will require you to lock up your cryptocurrency for a set amount of time, which means that you cannot withdraw your cryptocurrency during that period. Others will let you choose your lockup period or even opt out of one entirely.
Before choosing your lockup period, consider how long you can be without cryptocurrency. Think about future plans and whether you want it accessible to trade or buy something. If it is a long-term investment and you do not have any immediate plans, this can be less important; however, you should still account for potential changes in your mind.
You will also want to consider the interest rate for your chosen platform, as this directly affects the results of your staking rewards calculator. A higher interest rate results in larger rewards. You should also pay attention to how frequently that interest rate is compounded. Ideally, you want an account with daily compounding interest.
What Earnings to Expect
The best platforms will offer a higher interest rate if you lock up your cryptocurrency for longer. This means that you may want to play around with a crypto staking calculator to find the right balance for you between a high-interest rate and a lockup period you can handle.