Cryptocurrency investment uses two important terms, namely APR (Annual Percentage Rate) and APY (Annual Percentage Yield). Both show the rate of return on investment in one year, but in different ways. Then, what are the differences and effects in cryptocurrency investment? Check out the following comparison of APR and APY.
APR: Simple Interest Rate
APR stands for Annual Percentage Rate, which means annual interest rate. APR calculates the rate of return on investment in a simple way, which is based on the periodic interest rate and the number of periods in a year.
APR formula
The APR formula is as follows:
APR = Periodic interest rate x Number of periods in a year
APR Examples
You place your cryptocurrency on a platform that gives 1% interest per month. Thus, the APR is 12% (= 0.01 x 12). This means that in one year, your investment will increase by 12%. If you place $1,000, then after one year you will have $1,120 (= $1,000 x [1 + 0.12]).
APR is not only used in cryptocurrency investments, but also in other fields, such as personal loans. For example, some leading private lenders in the U.S. offer APRs ranging from 7% to over 25%, depending on the loan amount and other factors.
APY: Compound Rate
APY stands for Annual Percentage Yield, which means annual percentage yield. APY calculates the rate of return on investment in a more complex way, which is based on the periodic interest rate and the frequency of interest accumulation. APY considers the effect of compound interest, i.e. interest added to the authorized capital and earning interest again.
APY formula
The APY formula is as follows:
APY = (1 + Periodic interest rate) ^ Number of periods in a year – 1
APY examples
You place your cryptocurrency on a platform that provides 1% interest per month with compound interest paid monthly. Thus, the APY is 12.68% (= [1 + 0.01]^12 – 1). This means that in one year, your investment will increase by 12.68%. If you place $1,000, then after one year you will have $1,268 (= $1,000 x [1 + 0.1268]).
APR and APY Comparison: Which is Better?
From the example above, you can see that the APY is higher than the APR for the same interest rate and frequency. This is because the APY takes into account compound interest, which makes your investment grow faster. However, which is better between APR and APY depends on the type of cryptocurrency product you choose.
If you want to invest in cryptocurrency staking, then you should pay attention to the APY. Staking is a process where you hold your cryptocurrency on a specific platform to earn interest rewards. Usually, staking uses compound interest, so APY is the right measure to assess the performance of your investment. The higher the APY, the greater the return on your investment.
Jika Anda ingin berinvestasi dalam pinjaman cryptocurrency, maka Anda harus memperhatikan APR. Pinjaman cryptocurrency adalah proses di mana Anda meminjam atau meminjamkan cryptocurrency Anda di platform tertentu untuk mendapatkan atau membayar bunga.
Biasanya, pinjaman cryptocurrency menggunakan bunga sederhana, sehingga APR menjadi ukuran yang tepat untuk menilai kinerja investasi Anda. Semakin rendah APR, semakin kecil bunga yang harus Anda bayar.
Perbedaan Istilah APR dan APY di Platform Lain
Namun, perlu diingat bahwa tidak semua platform cryptocurrency menampilkan APR dan APY dengan jelas dan konsisten. Beberapa platform mungkin menggunakan istilah yang berbeda, seperti ROI (Return on Investment) atau ROR (Rate of Return), yang bisa saja berarti APR atau APY.
Beberapa platform juga mungkin menggunakan bunga majemuk dalam penawaran pinjaman, yang membuat APR menjadi tidak akurat. Oleh karena itu, Anda harus selalu memeriksa detail dan syarat-syarat dari setiap produk cryptocurrency sebelum berinvestasi.
Dengan mengetahui perbedaan dan pengaruh antara APR dan APY, Anda dapat membuat keputusan yang lebih baik dalam memilih produk cryptocurrency yang sesuai dengan kebutuhan dan tujuan Anda. Jangan lupa untuk membandingkan penawaran dari berbagai platform untuk mendapatkan hasil terbaik. Selamat berinvestasi!
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To be able to buy crypto assets on Bittime, make sure you have registered and completed identity verification. In addition, also make sure that you have enough balance by depositing some funds into the wallet. For your information, the minimum asset purchase at Bittime is Rp10,000. After that, then you can make a crypto asset purchase in the application.
Monitor the price chart movements of Bitcoin (BTC), Ethereum (ETH), Solana (SOL) and other cryptos to find out today's crypto market trends in real-time on Bittime.
Also Read:
7 Tips to Maximize USDT Staking Profits
Crypto Staking: A Basic Guide For Beginners
Enjoy Staking on Bittime with High Interest
DISCLAIMER: This article is informational in nature and does not constitute an offer or solicitation to sell and buy any crypto asset. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices may change significantly from time to time and Bittime is not responsible for fluctuations in crypto asset exchange rates.
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