What S The Difference Between Apy And Apr In Crypto

APY vs. APR

So, in most cases, APY will be higher than APR. For example, if you invest $1,000 at an APY of 2%, you will earn $20 in interest over the course of one year. If the investment had an APR of 2%, you would only earn $16.67 in interest because APR does not take compound interest into account.

When it comes to crypto, APY is often used to measure the interest earned on a crypto asset held in a lending platform. For example, if you deposit 1 BTC into a lending platform that offers a 10% APY, you would earn 10% on your 1 BTC deposit over the course of a year.

However, it’s important to note that APY can fluctuate based on the market. For example, if the price of BTC increases during the year, the value of your 1 BTC deposit will also increase. This means that the interest earned on your deposit will be worth more in USD terms.

On the other hand, if the price of BTC decreases, the interest earned on your deposit will be worth less in USD terms. This is why it’s important to consider the market when comparing APY rates. To calculate APY, you will need to divide the interest rate by the number of days in the year. Then, multiply that number by the number of days you are holding the investment.

If you’re getting into DeFi (or any other type of investing, for that matter), learning the difference between APY and APR is worthwhile.

Which Is More Accurate? APY or APR?

Generally speaking, APY is a more accurate measure of interest earned on a crypto investment over a 12-month period. However, APR can still be useful in some cases. For example, APR can be used to compare the interest rates of different investments.

If you’re looking to earn interest on your crypto, it’s important to compare APY rates across different lending platforms. This will help you find the platform that offers the best return on your investment.

While the APY on a cryptocurrency investment may be higher than what you would earn on a traditional investment, it is important to remember that there is also more risk involved. Cryptocurrencies are still a relatively new and volatile asset class, and as such, their prices can fluctuate wildly. Before investing in any cryptocurrency, be sure to do your research and understand the risks involved.