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APY vs APR in Crypto

APY vs APR in Crypto

If you've ever explored crypto lending, staking, or yield farming, you've likely encountered two acronyms: APY and APR. While these terms might seem interchangeable, understanding their differences is important for making investment decisions in the crypto space. Let's dive deep into what these metrics mean, how they differ, and why it matters for your crypto investment strategy.

Understanding APR (Annual Percentage Rate)

Annual Percentage Rate, or APR, represents the cost of borrowing crypto assets. This is the interest rate you'll pay on your crypto loans over a year, not accounting for compounding effects. When you're taking out a crypto loan, this is the number you need to focus on.

Here's a simple example: If you borrow 10,000 USDC with a 12% APR:

  • You'll pay 1,200 USDC in interest over a year

  • Monthly interest payment: 100 USDC (1,200 USDC ÷ 12 months)

  • Daily interest payment: 3.29 USDC (1,200 USDC ÷ 365 days)

APR is the standard metric used by lending platforms to display borrowing costs, making it easier to compare different loan options.

Exploring APY (Annual Percentage Yield)

Annual Percentage Yield, or APY, shows how much you'll earn on your crypto deposits or investments, including the effects of compound interest. This means you're not just earning interest on your initial deposit – you're also earning interest on previously earned interest. When you're looking to earn yield on your crypto holdings, APY is your key metric.

Let's look at an example with a 12% APY on a crypto savings account:

  • Initial deposit: 10,000 USDC

  • You'd earn over 1,200 USDC over a year, depending on the compounding frequency

The formula for calculating APY is: APY = (1 + r/n)^n - 1 Where:

  • r = nominal interest rate (as a decimal)

  • n = number of compounding periods per year

Key Differences Between APY and APR

Let's clarify the fundamental differences:

  1. APR (For Borrowers):

    • What you pay on loans

    • Doesn't include compound interest

    • Usually looks lower than APY

    • Used for crypto borrowing costs

  2. APY (For Lenders/Depositors):

    • What you earn on deposits

    • Includes compound interest effects

    • Higher than APR for the same nominal rate

    • Used for crypto savings and staking returns

The Role of Compounding in Crypto

Understanding compounding is essential for both borrowers and lenders in crypto:

For Lenders (APY):

  • Daily compounding: Most common in DeFi savings protocols

  • Weekly compounding: Typical in some staking platforms

  • Monthly compounding: Found in traditional-style crypto savings accounts

For Borrowers (APR):

  • Interest typically accrues daily but doesn't compound

  • Some platforms may require monthly payments

  • Others might collect all interest at loan maturity

Real-World Applications

Let's explore how APY and APR work in different crypto contexts:

  1. Crypto Savings Accounts

    • Advertised in APY to show total potential earnings

    • Rates typically range from 4-8% on stablecoins

    • Higher risk assets may offer higher APYs

    • Example: $10,000 USDC at 8% APY = $832.78 earned with daily compounding

  2. Crypto-Backed Loans

    • Shown in APR to display borrowing costs

    • Rates typically range from 6-12%

    • Collateral requirements vary by platform

    • Example: $10,000 loan at 8% APR = $800 in annual interest

  3. Staking

    • Usually displayed as APY since rewards can be restaked

    • Rates vary significantly by blockchain

    • Consider validator fees and unbonding periods

    • Example: ETH staking offering 4% APY

Conclusion

Understanding the difference between APY and APR is crucial for maximizing your crypto strategy:

  • APY shows what you'll earn on deposits, including compound interest

  • APR represents what you'll pay on loans, without compounding

  • Higher APY means better returns for savers

  • Lower APR means better rates for borrowers

  • Always consider the full picture: risks, costs, and market conditions

When evaluating crypto platforms, make sure you're comparing the right metrics – APY for savings and APR for loans. Remember that the highest rates aren't always the best option; consider platform security, reliability, and total costs before making your decision.

About Arch

Arch is building a next-gen wealth management platform for individuals holding alternative assets. Our flagship product is the crypto-backed loan, which allows you to securely and affordably borrow against your crypto. We also offer access to bank-grade custody, trading and staking services, powered by BitGo.

Disclaimer: This article is for informational purposes only and should not be considered financial advice. Cryptocurrency investments carry significant risks, and you should conduct thorough research and consider consulting with a financial advisor before making any investment decisions.

ChainFi, Inc (dba "Arch Lending" and referred to as "Arch" on this website) is not a bank. 


Loan Services. Crypto backed loans (“Loans”) are offered to U.S. borrowers by ChainFi, Inc. NMLS #2637200. NMLS Consumer Access.


Loan Availability. Loan availability may vary based on jurisdiction. Loans are current not available to U.S. residents of AL, CA, DE, HI, MN, MS, MT, NV, ND, RI, SC, SD, TX, VT, VA, or WA or to U.S. businesses in CA, DC, HI, MT, NV, NM, ND, RI, SD, or VT. We encourage you to contact us to determine if our loans are available in your state.


Loan Agreement. Loans are issued pursuant to a loan agreement between Arch and you. This legally binding document outlines your rights, obligations, interest rates, repayment schedules, potential fees, default consequences, and any other terms and conditions related to your loan. Your loan agreement may contain state-specific provisions. By signing the loan agreement, you acknowledge your acceptance of these terms, so please ensure you understand every aspect before proceeding. 


Interest Rates. Annual interest rates are subject to change and may vary based on loan type, the principal amount requested, and the borrower's jurisdiction of residence. 


Supported Assets. For the latest list of supported assets, refer to our Help Center.


No Financial, Investment or Tax Advice Provided. The information on this website, articles, guides, tools, or communications, is for general informational purposes only. It is not, and should not be construed as, financial, investment, tax, or other professional advice. Arch is not a financial advisor, investment advisor, broker, tax advisor, or accounting firm. We do not provide personalized advice or recommendations for your unique financial situation or goals. You should consult a qualified professional before making any financial, investment or tax decisions. Any examples, hypothetical scenarios, calculator results, or general discussions of financial or tax concepts are for illustration only and don't guarantee specific outcomes or apply to your personal circumstances. By using this website, you acknowledge you are solely responsible for your financial decisions and will seek independent professional advice as needed.


No Guarantee of Offers, Loans, or Returns. Your use or access to this website or platform does not guarantee the availability of any current and/or future offer, promotion, terms, loan, or return. All offers, promotions, terms, and loans are subject to availability and the sole discretion of Arch. We reserve the right to modify or withdraw any offering at any time without prior notice.


State-Specific Disclosures. Additional state-specific disclaimers may apply depending on your location. We encourage you to review all relevant disclaimers and terms carefully before proceeding.

*State of Idaho Disclaimer. In Idaho, ChainFi, Inc is doing business as Arch Lending and does not conduct activity under the name Arch.

ChainFi, Inc (dba "Arch Lending"), 595 Broadway, Floor 4, New York, NY 10012


For general questions, visit our Help Center or use the Intercom chat widget in the bottom right corner of any screen on this website. 


For customer service or complaints, email us at support@archlending.com, or call us toll-free: +1 855-272-4670 between Monday-Friday from 9am-7pm ET and Saturday-Sunday from 10am-5pm ET.

© 2025 All Rights Reserved

ChainFi, Inc (dba "Arch Lending" and referred to as "Arch" on this website) is not a bank. 


Loan Services. Crypto backed loans (“Loans”) are offered to U.S. borrowers by ChainFi, Inc. NMLS #2637200. NMLS Consumer Access.


Loan Availability. Loan availability may vary based on jurisdiction. Loans are currently not available to U.S. residents of AL, CA, DE, HI, MN, MS, MT, NV, ND, RI, SC, SD, TX, VT, VA, or WA or to U.S. businesses in CA, DC, HI, MT, NV, NM, ND, RI, SD, or VT. We encourage you to contact us to determine if our loans are available in your state.


Loan Agreement. Loans are issued pursuant to a loan agreement between Arch and you. This legally binding document outlines your rights, obligations, interest rates, repayment schedules, potential fees, default consequences, and any other terms and conditions related to your loan. Your loan agreement may contain state-specific provisions. By signing the loan agreement, you acknowledge your acceptance of these terms, so please ensure you understand every aspect before proceeding. 


Interest Rates. Annual interest rates are subject to change and may vary based on loan type, the principal amount requested, and the borrower's jurisdiction of residence. 


Supported Assets. For the latest list of supported assets, refer to our Help Center.


No Financial, Investment or Tax Advice Provided. The information on this website, articles, guides, tools, or communications, is for general informational purposes only. It is not, and should not be construed as, financial, investment, tax, or other professional advice. Arch is not a financial advisor, investment advisor, broker, tax advisor, or accounting firm. We do not provide personalized advice or recommendations for your unique financial situation or goals. You should consult a qualified professional before making any financial, investment or tax decisions. Any examples, hypothetical scenarios, calculator results, or general discussions of financial or tax concepts are for illustration only and don't guarantee specific outcomes or apply to your personal circumstances. By using this website, you acknowledge you are solely responsible for your financial decisions and will seek independent professional advice as needed.


No Guarantee of Offers, Loans, or Returns. Your use or access to this website or platform does not guarantee the availability of any current and/or future offer, promotion, terms, loan, or return. All offers, promotions, terms, and loans are subject to availability and the sole discretion of Arch. We reserve the right to modify or withdraw any offering at any time without prior notice.


State-Specific Disclosures. Additional state-specific disclaimers may apply depending on your location. We encourage you to review all relevant disclaimers and terms carefully before proceeding.

*State of Idaho Disclaimer. In Idaho, ChainFi, Inc is doing business as Arch Lending and does not conduct activity under the name Arch.

ChainFi, Inc (dba "Arch Lending"), 595 Broadway, Floor 4, New York, NY 10012


For general questions, visit our Help Center or use the Intercom chat widget in the bottom right corner of any screen on this website. 


For customer service or complaints, email us at support@archlending.com, or call us toll-free: +1 855-272-4670 between Monday-Friday from 9am-7pm ET and Saturday-Sunday from 10am-5pm ET.

© 2025 All Rights Reserved

ChainFi, Inc (dba "Arch Lending" and referred to as "Arch" on this website) is not a bank. 


Loan Services. Crypto backed loans (“Loans”) are offered to U.S. borrowers by ChainFi, Inc. NMLS #2637200. NMLS Consumer Access.


Loan Availability. Loan availability may vary based on jurisdiction. Loans are currently not available to U.S. residents of AL, CA, DE, HI, MN, MS, MT, NV, ND, RI, SC, SD, TX, VT, VA, or WA or to U.S. businesses in CA, DC, HI, MT, NV, NM, ND, RI, SD, or VT. We encourage you to contact us to determine if our loans are available in your state.


Loan Agreement. Loans are issued pursuant to a loan agreement between Arch and you. This legally binding document outlines your rights, obligations, interest rates, repayment schedules, potential fees, default consequences, and any other terms and conditions related to your loan. Your loan agreement may contain state-specific provisions. By signing the loan agreement, you acknowledge your acceptance of these terms, so please ensure you understand every aspect before proceeding. 


Interest Rates. Annual interest rates are subject to change and may vary based on loan type, the principal amount requested, and the borrower's jurisdiction of residence. 


Supported Assets. For the latest list of supported assets, refer to our Help Center.


No Financial, Investment or Tax Advice Provided. The information on this website, articles, guides, tools, or communications, is for general informational purposes only. It is not, and should not be construed as, financial, investment, tax, or other professional advice. Arch is not a financial advisor, investment advisor, broker, tax advisor, or accounting firm. We do not provide personalized advice or recommendations for your unique financial situation or goals. You should consult a qualified professional before making any financial, investment or tax decisions. Any examples, hypothetical scenarios, calculator results, or general discussions of financial or tax concepts are for illustration only and don't guarantee specific outcomes or apply to your personal circumstances. By using this website, you acknowledge you are solely responsible for your financial decisions and will seek independent professional advice as needed.


No Guarantee of Offers, Loans, or Returns. Your use or access to this website or platform does not guarantee the availability of any current and/or future offer, promotion, terms, loan, or return. All offers, promotions, terms, and loans are subject to availability and the sole discretion of Arch. We reserve the right to modify or withdraw any offering at any time without prior notice.


State-Specific Disclosures. Additional state-specific disclaimers may apply depending on your location. We encourage you to review all relevant disclaimers and terms carefully before proceeding.

*State of Idaho Disclaimer. In Idaho, ChainFi, Inc is doing business as Arch Lending and does not conduct activity under the name Arch.

ChainFi, Inc (dba "Arch Lending"), 595 Broadway, Floor 4, New York, NY 10012


For general questions, visit our Help Center or use the Intercom chat widget in the bottom right corner of any screen on this website. 


For customer service or complaints, email us at support@archlending.com, or call us toll-free: +1 855-272-4670 between Monday-Friday from 9am-7pm ET and Saturday-Sunday from 10am-5pm ET.

© 2025 All Rights Reserved