If you are a novice investor trying to forecast returns on your crypto funds, there is one thing that can be particularly useful. The use of APY (Annual Percentage Yield) account will allow you to stay aware of your future profits and apply a feasible passive income strategy.
In this explainer, we will discuss APY in crypto, learn how to calculate your interest rates, and determine which investment platform may suit you best. Although crypto passive investing may look similar to offerings of traditional financial institutions, there are quite a few tools and services designed specifically for digital assets.
Now, let us take a look at what APY means in crypto and how it relates to staking.
APY In Crypto
Annual Percentage Yield comes in handy when determining your yearly compound returns. To calculate it, you need two figures :
- total investment amount;
- a time frame of investment activity.
This way, you can consider APY as ROI (Return on Investment), relevant for a certain period of time.
Now, what about APY in cryptocurrency? You can think of it as a savings account where you deposit Bitcoin, or any other coins or tokens, and get a fixed return after some predetermined time. For instance, if you invest 10,000 USDC at 10% APY, you will earn 11,000 USDC in a year. Typically, interest accrues regularly: daily, weekly, monthly, or according to any other schedule. Depending on the conditions, you can either withdraw interest from your account or accumulate it to increase the basis for the APY calculation.
The most popular options to generate passive income by earning APY on your crypto assets are lending through DeFi protocols, crypto savings accounts, and staking.
Crypto Staking APY
Various exchanges, including crypto trading platform HitBTC, offer their customers an opportunity to connect to Proof of Stake blockchains and stake on their behalf. Usually, investors get more profit when they keep their coins or tokens locked up for longer.
It is worth noting that different coins offer various staking options. Thus, APY can also vary significantly – one network may offer 4% while the other sets a 14% rate. The final reward is based on multiple conditions: the performance of the validator nodes, block producing rates, the number of stakers involved, inflation, and others.
You can earn APY with cryptocurrencies on both centralized and decentralized exchanges. The former tend to be more stable as they base guarantee rates for a specified period, while the latter mind solely the market state.
Crypto APY at HitBTC
It is essential to choose between various options wisely. Passive income requires long-term commitment, so be prepared to lock up your assets for some time and temporarily lose control over these funds. If you decide to withdraw the funds earlier, you will lose the benefit of the accumulating interest.
There is no shortage of platforms ready to offer options to earn APY on your investments. When looking for the best-fitting solution, pay attention to the following aspects:
- Entrance barrier (e.g. limits on the investment balances)
- The way interest is calculated
- Types of crypto assets offered
Taking into account all the factors above, HitBTC can be considered as one of the best crypto trading platforms to earn APY via staking. For example, the AXS token boasts a 40% APY rate, but we do have dozens of other profitable options. Here you can find the complete list of tokens available for staking.
At HitBTC, we practice a one-day payout frequency. And if you decide to go on with crypto staking, you will earn greater interest. Eventually, you will benefit not only from the amount you’ve invested but also from the interest previously earned.
Bitcoin price today might be way different from the one you were hoping for, which can stop some of us from investing in the long term. However, practice shows that long-term strategies are usually the ones that work better, not only for your wallet but also for your mental health.
When dealing with crypto APY, no one is protected from volatility, but it still gives you an option to earn greater profits than simple holding. On top of that, do not forget to diversify your portfolio and experiment with different assets – HitBTC offers a good range of tokens to choose from.
Last but not least, check out our beginner-friendly HitBTC app to take your first steps into the cryptocurrency market.
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