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Imagine you have some crypto you don't want to sell. You can earn crypto interest on it by holding it in a savings account. And then earn more on top of the accumulated amount. That's the power of compound interest.
1,000 USDT with a 15% compound interest rate per year would earn you 150 USDT in the first year, totaling 1,150 USDT.
In the second year, a 15% interest rate on the new balance brings it to 1,322.50 USDT.
The frequency of compounding plays a big role in how fast your crypto savings grow.
For example, if the crypto interest is compounded less frequently, such as annually or monthly, your holdings will increase at a slower pace.
However, if you choose a crypto savings account where you can earn daily interest on your crypto deposit, your earnings will pile up faster.
1,000 USDT with a 15% daily compound interest rate would earn you 161.80 USDT in the first year, totaling 1,161 USDT.
In the second year, a 15% interest rate on the new balance brings it to 1,349.78 USDT.
The compound effect is demonstrated most effectively by continuously reinvesting the earned interest to gradually transform small gains into sizeable returns.
Hint: The more frequently the interest compounds, the bigger the returns.