What's the difference between APR and APY in the context of cryptocurrency?

3 answers

• Dec 17, 2021 · 3 years ago
  APR stands for Annual Percentage Rate, while APY stands for Annual Percentage Yield. In the context of cryptocurrency, APR refers to the annualized interest rate that lenders offer to borrowers. It represents the cost of borrowing or the return on investment without taking compounding into account. On the other hand, APY takes compounding into consideration and provides a more accurate representation of the actual return on investment. It factors in the effect of reinvesting the interest earned, which can significantly impact the overall returns. In cryptocurrency lending platforms, borrowers pay interest based on the APR, while lenders earn interest based on the APY. It's important to understand the difference between APR and APY to make informed investment decisions in the cryptocurrency space.
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• Dec 17, 2021 · 3 years ago
  Alright, let me break it down for you. APR is like the base interest rate that lenders charge on loans or pay to lenders for their investments. It's a straightforward percentage that doesn't consider the effect of compounding. APY, on the other hand, takes into account the compounding effect and gives you a more accurate picture of the actual returns. So, if you're looking to borrow cryptocurrency, you'll be charged interest based on the APR. But if you're lending your crypto, you'll earn interest based on the APY. Keep in mind that APY will always be higher than APR because it factors in the power of compounding. So, when comparing different investment options, make sure to look at the APY to get a better understanding of the potential returns.
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• Dec 17, 2021 · 3 years ago
  In the context of cryptocurrency, APR and APY play a crucial role in determining the returns on your investments. APR represents the interest rate you'll pay or earn on an annual basis, without considering compounding. APY, on the other hand, takes into account the compounding effect and provides a more accurate measure of the actual returns. Let's say you're lending your cryptocurrency on a platform like BYDFi. The APR will determine the interest rate you'll earn, while the APY will show you the actual returns after considering compounding. It's important to pay attention to both APR and APY to understand the true potential of your investments and make informed decisions. So, next time you come across these terms, remember that APR is the base rate, and APY is the real deal when it comes to calculating your returns.
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