APY, or annual percentage yield, refers to the rate of return earned on a particular investment over the span of one year. This rate takes into account the effect of compounding interest, which is calculated at regular intervals.
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What Is Annual Percentage Yield (APY)?
Annual percentage yield (APY) acts as a cryptocurrency savings account similar to an annual percentage rate (APR) account. You may deposit your bitcoin (or another crypto asset) and receive a fixed rate of return over a specific period of time.
The annual percentage yield (APY) is a method of calculating the amount of money earned on a money market account over the course of a year. To put it another way, this is a technique to track how interest accumulates over time.
The interest you earn on your funds is referred to as compounding interest. It refers to the amount received on both the principal amount (the money you put into the account) and the interest that has been accumulated. Compounding makes it possible to create money over time, which is why it is such a strong instrument for investment. This is not the same as simple interest. The term “simple interest” refers to interest generated just on the main deposit.
Cryptocurrency savings accounts with APY may be just what you need if you are a crypto investor who wants to make a return on investment while holding it. There are a number of crypto yield programs to choose from. Therefore, do your research before signing up for one. Factors like fees, entrance barriers, interest-earning procedure, and types of crypto assets available may vary from platform to platform.
There are also introductory APYs that crypto exchanges offer and you should be careful before investing in them. Some of these programs utilize the strategy of offering higher APYs to attract customers in the beginning and drop the rates after trapping a big pool of customers. If you come across a yield farming platform or program offering high APYs, make sure to check its credibility in the community.