Eager to start with crypto? Join Nexo – the trusted institution for digital assets to easily buy, earn, and exchange crypto.Sign Up
The annual percentage yield, or APY for short, serves as the standard for expressing the annual interest rate associated with earnings.
But that’s not all.
The APY considers the potential for growth resulting from the constant reinvestment of the earned interest over time.
Or, as it's commonly known — compound interest.
Suppose you deposit 10,000 USDT into а crypto savings account with an APY of 16% compounded daily for one year.
Like a snowball effect, your crypto earnings would grow and generate more interest.
After six months, your balance would reach 10,832.68 USDT and after one year, your balance would reach 11,734.70 USDT.
APY can be of two types - fixed and variable.
A fixed APY, say 16%, means your interest rate stays the same. On the other hand, a variable APY can fluctuate, for example, between 10% and 16%.
Keep in mind that while higher rates may seem attractive, it's essential to consider other factors, such as the platform's reputation, security measures, and any applicable fees, when choosing your crypto partner.
Hint: With APY, you earn more interest, potentially leading to higher returns.