APY and APR in cryptocurrency: Which one affects your profit more?

2026-01-15 17:28:26

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When exploring staking, lending, or yield farming opportunities in cryptocurrency, you will definitely encounter two figures: APR and APY. At first glance, they seem similar, but misunderstanding them can lead to significant profit loss. This article will help you clearly distinguish these two concepts and choose the right metrics to optimize your investment returns.

Why distinguish between APR and APY?

An important point many investors overlook is that APR and APY are not two different names for the same thing. They are calculated completely differently and can lead to substantially different profit outcomes, especially over long investment periods.

If you only look at APR without considering APY, you will miss out on the compounding interest your money could earn. Conversely, comparing products with different interest structures without using APY can lead to unfair decisions.

Understanding the correct relationship between these two concepts helps you:

Accurately assess actual returns
Fairly compare different investment opportunities
Maximize long-term profits
Minimize misunderstandings about the amount of money you will have

What is APR? Understanding simple interest rates

APR (Annual Percentage Rate) is a number indicating how much interest you will earn in one year, but not accounting for interest-on-interest.

A simple example: If you lend 1 BTC with an APR of 5%, you will earn 0.05 BTC in interest over that year. If you do not reinvest this interest, it stops there – no additional interest is generated.

APR calculation formula:

BTC-1,29%

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