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What is APY in Crypto?

APY stands for annual percentage yield, which refers to the compounded return on investment per year expressed as a percentage. It is a crucial metric for investors in the crypto world, as it helps them understand how much they can earn from staking or holding their cryptocurrencies over a given period. In this article, we will delve into the meaning of APY in crypto, and how to maximize your profits through the best APY platforms.

crypto apy
crypto apy

Understanding APY in Crypto

APY is the term used to express the total return on investment over a year, taking into account compound interest. Compound interest implies that an investor earns interest not only on the original investment but also on the interest earned previously. Thus, the longer a trader holds their crypto, the more interest they will earn, making it an attractive option for long-term investors.

APY is different from APR (annual percentage rate), which only takes into account simple interest, without compounding. In the crypto world, APY is more commonly used, as the majority of crypto platforms offer staking or yield farming opportunities that provide a compounding return on investment.

Let’s say an investor invests $1000 in a crypto platform that offers a 10% APY. At the end of the first year, they would have earned $100 in interest. This $100 in interest would then be added to the original investment of $1000, bringing the total amount to $1100. Thus, in the second year, the investor would earn 10% interest on $1100, which is $110.

In comparison, if the platform only offered a simple interest rate of 10% (APR), investors would only earn $100 in interest, every year, for the two-year period, regardless of how much the investment grows. Thus, APY is a more accurate representation of the total return on investment over a year, taking into account the effects of compounding interest. In a nutshell, APY takes into account the compounding of interest, while APR only considers the simple interest earned on the original investment amount.

APY in Crypto Staking

APY in crypto staking refers to the annual percentage yield that a staker can earn by holding their crypto assets in a staking pool. Staking is a process where a holder of a certain type of cryptocurrency locks their tokens into a specialized wallet and earns rewards for participating in maintaining the security and integrity of a blockchain network. The rewards earned by stakers are in the form of newly minted coins and a portion of transaction fees. The APY is calculated by taking into account the rewards earned over a year, and expressing it as a percentage of the original investment.

APY = (Rewards earned over a year / Original investment) x 100%

For example, if a staker invests 100 units of a cryptocurrency into a staking pool, and earns 10 units of that cryptocurrency as rewards over the course of a year, their APY would be 10%. This APY can change over time based on factors such as network changes, competition, and overall network utilization.

APY in crypto staking is an attractive option for investors as it provides a way to earn passive income while also supporting the security and stability of a blockchain network. Different cryptocurrencies have different staking mechanisms, each with its unique set of rewards and corresponding APY rates. For example, PoS (Proof of Stake) networks typically offer higher APY rates compared to PoW (Proof of Work) networks. Some popular cryptocurrencies that offer staking opportunities include Ethereum, Cosmos, Tezos, and Polkadot, each with its set of rules, rewards, and APY rates. These APY rates can range from a few percent to over 20% depending on the network, and the amount being staked. It’s important to perform thorough research and understand the specific details of each staking opportunity before investing in it.

Best Platforms to Earn APY

There are several platforms that allow investors to earn APY on their crypto holdings, including DeFi Swap, AQRU, Bitstamp, and others. To maximize profits, it’s essential to invest in safe and reliable platforms that offer good APY rates, typically between 17% and 75%. These platforms provide different features and benefits, and offer varying APY rates, making it important for investors to choose the right platform for their needs.

defi swap

1. DeFi Swap

Investing in crypto can be a great way to generate returns, but not all platforms are created equal. If an investor is looking to earn APY (Annual Percentage Yield) on crypto, our number one pick is DeFi Swap. DeFi Swap is a new decentralized exchange (DEX) hosted on the Binance Smart Chain, offering token swapping, staking, and yield farming options.

One of the key advantages of DeFi Swap is its automatic liquidity pools, which provide the financial resources to facilitate token swaps in a cost-effective and decentralized manner. This allows investors to generate a steady income stream through DeFi Swap.

DeFi Swap offers four tiers of investment options, each with a different lockup period and APY.

Tier Lockup Period APY
Bronze 30 days 30%
Silver 90 days 45%
Gold 180 days 60%
Platinum 365 days 75%

In this table, each tier has a different lockup period, which is the amount of time the investment must remain in the staking pool. The longer the lockup period, the higher the APY (annual percentage yield) that the staker can earn.

Getting started on DeFi Swap is easy, as an investor can link a BSC-compatible crypto wallet in just a few minutes. The platform has full support for MetaMask and WalletConnect, two of the most popular wallet providers. With exciting plans for upgrades and enhancements to the DeFi Swap platform, there’s no better time to start earning APY on crypto.

aqru

2. AQRU

AQRU aims to make it easy for people to earn interest on their cryptocurrency holdings. They offer a wide range of deposit options, including bank transfers, debit or credit card purchases, and crypto transfers. AQRU invests these deposits in a lending pool, which is then lent to institutions like exchanges and retail borrowers. These loans are fully collateralized, providing security to AQRU’s depositors.

One of the key advantages of AQRU is its flexibility. There are no lockup periods or fixed terms, and interest is paid daily. Thus, depositors can access their funds at any time, making AQRU a convenient choice for those who need quick access to their capital. Additionally, the minimum deposit of $100 makes AQRU accessible to a wide range of investors.

The platform offers an attractive interest rate, with an APY of 7% on Bitcoin and Ethereum, and a slightly higher APY of 12% on stablecoins like USDT, USDC, and DAI. This gives depositors the opportunity to earn good returns on their crypto holdings without having to engage in the more volatile markets. With AQRU, investors can earn interest on their crypto while retaining the benefits of holding crypto, such as decentralization and control over their funds.

bitstamp logo

3. Bitstamp

Bitstamp is a leading cryptocurrency exchange platform, and its Bitstamp Earn program is a way for users to earn passive income from their crypto holdings. With Bitstamp Earn, users can earn high-interest rates on popular cryptocurrencies like Algorand and Ethereum 2.0. By staking Algorand, users can earn a 5% annual percentage yield, and by staking ETH 2.0, they can earn an annual percentage rate of 4.45%.

To participate in Bitstamp Earn, users need to transfer their Algorand or Ethereum 2.0 to their Bitstamp account. The staked funds are then used to validate transactions on the blockchain, generating staking rewards that are paid directly into the user’s Bitstamp account. Algorand staking rewards are paid out on a quarterly basis, while ETH 2.0 staking rewards are paid out monthly.

This is important because Ethereum 2.0 is a major upgrade, and users will only be able to cash out their ETH2 once the upgrade launches. However, the benefits of staking with Bitstamp include high returns, a user-friendly interface, and the security of a leading exchange platform.

coinbase logo big

4. Coinbase

Coinbase Staking is an easy and convenient way for users to earn rewards on their crypto holdings by participating in the network validation process of selected cryptocurrencies. To start earning, investors need to deposit their eligible cryptocurrency into a Coinbase account, and then participate in the staking process by holding the crypto in a special staking wallet. The amount of rewards received by the investor depends on the current APY rate of the specific cryptocurrency staked, and the duration for which they hold it in the staking wallet.

Following is a chart of the APY rates offered by Coinbase staking:

Asset Rewards Rate Mechanism
Cardano (ADA) 2.00% APY Staking
Cosmos (ATOM) 6.12% APY Staking
Ethereum (ETH) 3.89% APY Staking
Solana (SOL) 2.40% APY Staking
Tezos (XTZ) 3.19% APY Staking
Algorand (ALGO) 0.45% APY Staking
DAI 0.15 APY Staking

To start earning APY on Coinbase, investors only need to deposit a minimum of $1 into their Coinbase account. By participating in staking, investors can support the security and stability of the blockchain network, and earn passive income on their crypto holdings. The rewards earned through staking are paid directly into the investor’s Coinbase account, making it an easy and accessible way to earn additional returns on their crypto investments.

crypto.com

5. Crypto.com

Crypto.com is a comprehensive cryptocurrency platform that offers a range of services for its users. It operates as a spot and derivatives trading exchange, allowing users to buy and sell a variety of cryptocurrencies. Additionally, it offers a high-yield Crypto Earn program, allowing users to earn interest on their crypto holdings with an attractive Annual Percentage Yield (APY) rate.

At Crypto.com, users can earn APY on 50 different cryptocurrencies, with the best yield currently being 14.5% on Polkadot (DOT) and Polygon (MATIC) tokens. However, to earn the highest APY, investors are required to purchase and stake $40,000 worth of Crypto.com’s native token, CRO, and commit to a three-month locked term. There is also a maximum amount that the yield can be applied to, which is $30,000. Beyond this, the APY rewards rate will be 50% lower. The maximum APY rate for Bitcoin and Ethereum is 6%, and its 10% for stablecoins.

In addition to its Crypto Earn program, Crypto.com also offers a crypto loan feature, allowing users to borrow against their crypto assets, as collateral, without having to sell them, up to 50% of the value of their holdings.

Crypto.com is available to users in the United States, providing a secure and user-friendly platform for buying, selling, and earning interest in cryptocurrencies. With its wide range of services and high APY rates, it is a popular choice for both novice and experienced crypto investors.

etoro trading bot

6. eToro

eToro is a reputable investment platform that offers a range of investment options, including the opportunity to earn annual percentage yield (APY) on cryptocurrencies. It supports Tron and Cardano for APY, and is also compatible with ETH 2.0, offering a yield of 5-6.25%. Although the Cardano APY on eToro can vary, users have reported receiving an APY of 5.4%.

Every month, the APY is distributed automatically without any manual user intervention. However, eToro retains a portion of the yield to cover its operating expenses. The portion of the yield received by the user is determined by their membership level. Bronze members and all US accounts receive 75% of the yield, while Silver, Gold, and Platinum Club members receive 85%, and Diamond and Platinum+ Club members retain 90% of the yield.

Aside from earning APY on crypto, eToro also provides the option of copy trading, which is said to have delivered an average yearly profit of 30.4% in 2021. The platform accepts various payment methods, including Paypal, eWallets like Skrill and Neteller, bank wires, and credit cards, making it a convenient option for buying crypto. It is regulated by ASIC, CySEC, and FCA, making it a safe place to invest in cryptocurrencies.

nexo logo

7. Nexo

Nexo is a well-known platform that offers a range of crypto-related services, including a popular crypto interest account that pays daily interest with a high APY of up to 17%. Nexo offers a user-friendly experience with both a desktop platform and a mobile app. In addition to earning interest in crypto, investors can also buy and exchange cryptocurrencies on the platform.

To get the best Nexo APY, investors must hold at least 10% of their portfolio in NEXO tokens, commit to a one-month fixed term during which the funds will be locked, and choose to receive the interest payouts in NEXO. Additionally, Nexo allows users to take out crypto loans backed by their assets, with a loan-to-value (LTV) of 50% on Bitcoin and 90% on USDT.

It is worth noting that earning interest on Nexo is not available in the United States, but borrowing crypto is possible. Overall, Nexo is a versatile platform that offers users the ability to earn high interest on their crypto and access lending services backed by their assets.

Comparison Table: Staking Platforms Feature

Platform Launch Year Tokens Maximum APY Payout Duration Pros Cons Wallets Supported Countries Available Features
Defi Swap 2009 UNI, SUSHI, CAKE, WBTC, DAI, COMP, AVAX, LINK, and more. 75% 30-365 days High APY rates High level of exposure to a token in need of liquidity MetaMask, Ledger, WalletConnect, Coinbase Wallet, more Global/ Restricted in some countries like Afghanistan, Bangladesh, Bolivia, Burundi and more Token Swapping, Yield Farming, Liquidity Pools
AQRU 2019 Real-World Receivables Maple USDC Flex USDC 10% Daily Flexible deposit options Lower APY rates compared to other platforms MetaMask, Ledger, Trezor, WalletConnect, Coinbase Wallet, more Global/ Restricted in some countries Smart saving, Liquid Swap
Bitstamp 2011 ALGO, ETH 2.0 4.5% 1-2 days High returns, user-friendly Lacks more advanced trading features Bitstamp account Global/ Restricted in some countries like United States, the European Union, and Singapore Crypto Trading, Instant Buy/Sell, Bitstamp Debit Card
Coinbase 2012 ADA, ATOM, ETH, SOL, XTZ 6% 1-2 days Easy and convenient to use High fees on simple trades and staking Coinbase account Global/Restricted in Singapore and any country restricted by the Office of Foreign Assets Control (OFAC) Crypto currency Wallet, Coinbase Card, Coinbase Earn, Coinbase Commerce
Crypto.com 2016 BTC, ETH, MATIC, and ATOM 14.5% 7 days Low fees Higher trading fee for low volume traders Crypto.com DeFi Wallet Global Crypto Debit Card, Crypto Earn, Crypto Credit, Crypto Pay, Crypto Invest
eToro 2007 ADA, TRX, ETH 6.25% 8 days Easy access to crypto market Inactivity fee eToro Money Global/ Restricted in some countries like India, Canada, Indonesia, New Zealand, China, Russia, and South Africa Social Trading, Copy Trading, eToro Wallet, eToro Club
Nexo 2018 TUSD, USDC, DAI USDT, BTC, ETH XRP, LTC 17% 1-3 days Higher yields Bad for long-term investment Ledger hardware wallet Global/ Restricted in some countries like Bulgaria, The Central African Republic, Cuba, Estonia, Iran, The US state of Alaska, The US state of New York, The US state of Vermont Crypto Loans, Crypto Savings, Nexo Card, Earn Interest on Fiat, Instant Crypto Credit

Steps to Earn APY

Step 1: Choose a platform: An investor must research and compare different DeFi platforms to determine which one suits their investment goals and risk tolerance. An investor can consider factors such as fees, supported cryptocurrencies, and security measures when making their decision.
Step 2: Create an account: Once an investor has chosen a platform, they must create an account by providing their personal information, such as name, email address, and phone number. The investor may also need to verify their identity through a government-issued ID or other means, depending on the platform's requirements.
Step 3: Deposit cryptocurrency: Once the investor’s account is verified, they can deposit their cryptocurrency holdings into the platform's wallet. Make sure to check the minimum deposit amount and any fees associated with the deposit.
Step 4: Choose a staking option: DeFi platforms offer different staking options that can vary in terms of reward rates and lock-up periods. An investor must choose a staking option that fits their investment goals and risk tolerance. Keep in mind that longer lock-up periods may offer higher APY rates but may also limit the flexibility to access funds.
Step 5: Start staking: Once an investor has chosen a staking option, they can start staking cryptocurrency by following the platform's instructions. The investor’s cryptocurrency will be locked up for the duration of the staking period, and will start earning APY immediately.
Step 6: Monitor earnings: An investor must keep track of their earnings on the platform's dashboard, and make sure to take note of any changes in APY rates or staking options that may affect their investment strategy.
Step 7: Withdraw funds: When the staking period is over, an investor can withdraw funds, along with any earnings. An investor must be aware of any withdrawal fees or minimum withdrawal amounts, and make sure to follow the platform's instructions to avoid any delays or complications.

An investor must remember to always do their own research and understand the risks associated with investing in cryptocurrency before making any decisions.

Risks and Benefits of Earning APY in Crypto

Earning an annual percentage yield (APY) in cryptocurrency is an increasingly popular way for investors to grow their crypto holdings. However, like all investments, there are both risks and benefits to consider.

Benefits of Earning APY in Crypto

High APY rates

High APY rates are one of the most appealing features of earning APY in cryptocurrency. Some platforms offer APY rates that are significantly higher than those offered by traditional savings accounts or other low-risk investment options. For example, some DeFi (decentralized finance) platforms may offer APY rates that can reach double-digit percentages because many platforms are built on blockchain technology, allowing for decentralized lending and borrowing, which can eliminate the need for traditional financial intermediaries, thereby, reducing transaction costs.

Diversification

Diversification is a fundamental principle of investing, and it involves spreading investments across different asset classes to minimize the risk of losses. Investing in cryptocurrency to earn APY is a great way to diversify an investment portfolio and potentially earn returns in an alternative asset class. Cryptocurrency is a new and emerging asset class that is not directly tied to the performance of traditional financial markets, such as stocks or bonds. Thus, cryptocurrencies can provide a unique investment opportunity for those looking to diversify their portfolio. Additionally, investing in cryptocurrency to receive APY allows investors to earn returns on their holdings without having to actively trade or speculate on the price movements of the underlying token.

Flexibility

When it comes to earning APY on cryptocurrency, investors have the flexibility to choose from a wide range of cryptocurrencies that suit their investment goals and risk tolerance. This level of choice is not always possible with traditional investments, which may limit investors to a select few options. For example, some investors may be interested in high-risk, high-reward investments, while others may prefer a more conservative approach.

By earning APY on various cryptocurrencies, investors can align their investments with the desired level of risk and reward. This can be particularly useful for those looking to diversify their portfolio across different asset classes, or for those who are interested in exploring emerging markets. Additionally, investors can also choose to adjust their investment strategy as their financial situation or market conditions change, offering a level of flexibility that is not always available with other investment options.

Liquidity

Liquidity refers to how quickly and easily an asset can be bought or sold without significantly affecting its market price. With the option to withdraw the crypto holdings at any time, investors can convert their cryptocurrency back into fiat currency or other cryptocurrencies, providing liquidity for the investments. Thus, investors can have access to funds whenever they need them, and they can respond to market changes, or take advantage of new investment opportunities. However, it’s important to note that not all crypto APY platforms offer the same level of liquidity. Some may have withdrawal limits or fees that could affect the investor’s ability to access funds quickly.

Risks of Earning APY in Crypto

Market volatility

Market volatility is a significant risk of earning APY in crypto. Cryptocurrencies are known for their volatility, and their prices can fluctuate dramatically in a short period. Price fluctuations are often caused by a range of factors such as news events, regulatory changes, or even social media discussions. These price changes can significantly impact the value of an investor’s investment, implying that they could potentially lose money even if they are earning APY.

It’s worth noting that the degree of volatility varies across different cryptocurrencies. Some coins may be more volatile than others, and investors should consider their risk tolerance when choosing which assets to invest in. Additionally, market volatility may provide opportunities for some investors to make profits if they can accurately predict market trends. However, this requires a deep understanding of the cryptocurrency market and carries additional risks, including the risk of losses.

Security concerns

Security is a major concern when it comes to cryptocurrency. The decentralized nature of many cryptocurrencies means that they are not backed by a central authority or insured by the government. This lack of regulation and oversight can make them vulnerable to hacking and other security breaches.

Cryptocurrency exchanges, where investors may trade or earn APY, are often targeted by cybercriminals. In the past, there have been several high-profile cases of cryptocurrency exchanges being hacked, resulting in the loss of millions of dollars worth of digital assets. In May 2019, the popular cryptocurrency exchange Binance was hacked, resulting in the theft of over 7,000 bitcoins, worth around $40 million at the time. The hack was reportedly carried out through a combination of phishing and viruses. In 2014, the Japan-based cryptocurrency exchange Mt. Gox filed for bankruptcy after losing approximately 850,000 bitcoins, worth around $450 million at the time. The exchange claimed that the loss was due to a hack of their hot wallet.

It’s important to carefully research and choose a reputable exchange or platform to earn APY on, and to take steps to secure cryptocurrency holdings, such as using two-factor authentication and storing your digital assets in a secure hardware wallet.

Platform risk

When investing in cryptocurrency, the platform used to earn APY is just as important as the cryptocurrency being invested in. Different platforms have varying levels of security and reliability, with some being more trustworthy and established than others. It is essential to research and choose a reputable platform that has proper security measures in place to protect investments from fraud and hacking attempts. Additionally, there is always the possibility of platform malfunction or failure, which can cause investors to lose access to their funds. Therefore, it is crucial to consider the platform’s stability, reliability, and reputation before investing in cryptocurrency.

Lock-in periods

Lock-in periods refer to the duration for which an investor cannot withdraw their funds from the platform. This can reduce liquidity and limit an investor’s ability to respond to market changes or take advantage of other investment opportunities. The length of the lock-in period can vary between platforms, and it’s important to carefully consider this before committing funds. Some platforms may offer higher APY rates but may require longer lock-in periods, while others may offer lower rates but more flexible withdrawal options. It’s important for an investor to weigh the potential benefits and drawbacks of lock-in periods, and choose a platform that aligns with their investment goals and risk tolerance.

APY Tax

APY, or Annual Percentage Yield, is a measure of the return on investment, including the effect of compounding interest. In most countries, earnings from APY are subject to taxation, which is based on the investor’s income tax rate.

In general, the taxation of APY earnings falls into the category of capital gains tax or income tax, depending on the nature of the investment and the investor’s specific tax laws. In some countries, such as the United States, interest earned on cryptocurrency is considered taxable income. On the other hand, in countries like Singapore, interest earned on cryptocurrency is considered capital gains.

To report APY taxes, investors need to keep track of their earnings and expenses related to their investments. This includes any transaction fees, gas fees, or other expenses related to the investment. In most countries, tax laws require investors to report their earnings on their tax returns.

The tax rate on APY earnings varies depending on the country and the investor’s income tax bracket. In the United States, the tax rate on APY earnings ranges from 10% to 37% depending on the investor’s income tax bracket. In Singapore, capital gains on cryptocurrency are not taxed if they are considered personal investments. However, if the cryptocurrency is used in a trade or business, the capital gains will be taxed.

Let’s say that a cryptocurrency investor is living in the United States, and has earned $1,000 in APY from cryptocurrency holdings using DeFi Swap. The investor held the cryptocurrency for more than a year, so their earnings would be considered long-term capital gains. If the investor has an annual income of $60,000, and given the tax rate on long-term capital gains in the $60,000-$80,000 income range in the United States is currently 15%, the investor would owe $150 in taxes on the $1,000 earnings.

It’s important to note that tax regulations can change over time, so it’s essential to stay up-to-date on the current rules and regulations based on jurisdiction. It’s also a good idea to consult with a tax professional to ensure accurate reporting of cryptocurrency earnings and pay the correct amount of taxes.

Conclusion

APY in crypto is a growing trend in the world of finance, providing an alternative to traditional banking with a higher return on investment. With a monthly search volume of 1,600 times, it’s clear that many people are interested in learning about this topic. APY rates in the crypto world are subject to change, and it’s recommended to diversify the portfolio by using multiple platforms.

DeFi Swap, AQRU, and eToro are some of the top platforms that offer high APY rates, user-friendly interfaces, and additional features like copy trading. However, it’s important to remember that the crypto market is volatile in the short-term, but tends to trend upward in the long term, providing dual benefits of annual yield and asset appreciation. Investing in crypto for APY requires careful consideration and understanding of the market and the associated risks.

FAQs

What is APY?

APY stands for Annual Percentage Yield, which is a measure of the annual rate of return on investment. In the context of cryptocurrency, APY refers to the interest or yield earned on a cryptocurrency asset, typically through staking or lending.

How is APY calculated?

APY is calculated based on the interest rate and the frequency of compounding. The formula for calculating APY takes into account the interest rate, the number of times interest is compounded in a year, and the duration of the investment.

What is staking?

Staking is a process by which cryptocurrency holders can earn rewards by holding and validating transactions on a blockchain network. In staking, users lock up their crypto assets in a wallet or smart contract, and participate in the network’s consensus mechanism to earn rewards.

What is lending?

Lending is a process by which cryptocurrency holders can earn interest on their crypto assets by lending them to borrowers. The borrower pays interest on the loan, and the lender earns a portion of that interest as a reward.

Is earning APY on cryptocurrency taxable?

Yes, earning APY on cryptocurrency is generally considered taxable income. The tax rate on APY earnings depends on various factors, including the income level of the investor, the type of cryptocurrency being held, and the length of time the cryptocurrency has been held. It’s important to keep accurate records of cryptocurrency transactions to report income and calculate taxes.

Nakul Shah
Nakul Shah - DLT Expert and Project Manager
53 Articles

Nakul Shah is a technology enthusiast, blockchain/AI consultant, author, and writer, passionate about innovative solutions. He is a regular speaker at conferences across the globe on blockchain, DLT, and fintech. Nakul specializes in writing content for fintech, gaming, emerging technology, and eCommerce sectors, and offer consultancy, training, and editorial services to clients across the globe. He is also a contributor to various publications, and has authored over 1000 articles, 100+ case studies, 75+ white papers, and a book on Blockchain titled “Blockchain for Business with Hyperledger Fabric.”

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