In this post, you will learn how to earn compound interest on crypto, how compound interest works, etc.
Many investors new to the cryptocurrency space are unaware that they can earn interest on their digital token holdings, just like they would in a bank account.
However, unlike the traditional bank account, one will have access to significantly more attractive yields.
Compound interest is one of the most significant concepts in personal money management. It will help you generate higher yields from your investments and understanding the principle may also prevent you from going into debt.
The term “compound interest” is typically based on the definition of the term “interest,” meaning that compound Interest can only be archived if simple interest is accumulated in the first place.
If you don’t receive any interest for depositing money in a savings vehicle, such as a savings account, the principle of compound interest does not apply. Kindly read through this article to learn more about how to earn compound interest on crypto.
What is Crypto Compound Interest?
Compound Interest is money earned/gotten on top of the interest that was already earned. Not only does one earn simple interest on their initial deposit in an investment, but also Interest on the interest they earned in the first phase of their investment
- Compounding simply means earning interest on the simple interest of an initial or first investment over the long term
- Compound interest brings higher returns on investments and savings but, in some cases, may also work against you if you are the one paying interest on a loan
How Does Crypto Compound Interest Work?
For you to earn compound interest, users must continue to reinvest the returns from interest-bearing products such as crypto savings, loans, and staking. Without compounding, users can lose out on exponential returns over time.
Crypto Compound interest is a so-called or known as “interest on interest,” which is the reinvestment of one’s interest and adding it to the initial sum of a deposit.
What you do is receive your interest on the first investment and then add it back to the whole amount in order to get a higher profit next time.
Many traders use this technique regularly, In the DeFi community. They claim rewards for staking tokens and reinvest them into staking, thereby increasing the amount of the staked coins and also their future rewards. This way, they create compound interest in crypto on their own.
How to Earn Compound Interest on Cryptocurrency
To learn how to earn compound interest on cryptocurrency, we will be using an illustration to show you how to earn compound interest on cryptocurrency.
Suppose you decide to stake 10,000 good crypto coins (yes, we will use imaginary tokens). Over the first period, you receive 7% interest, which is 700 coins, so you then add them to the initially staked amount.
Now, your stake will now be 10,700 tokens. As the second phase comes to an end, you receive 10% interest on this sum, which is 1,070 coins.
Again, you then reinvest by adding them to your stake. Your stake will increase to 11,770 coins. With the interest of 6% that the 3rd period brings you, you receive around 706 tokens, and your overall amount reaches 12,476 coins.
On the contrary, if you collected the rewards but kept them to yourself, leaving the same amount for staking, in the end, you would only get 12,300 tokens. The difference might not seem that big, but it will become more noticeable over time.
Besides, the higher the interest, the better your profit will be. For instance, if the crypto gets only 20% interest, the compound interest over this time would be 22%. But if it gets 100% interest, the compound interest would be 300%, which is a different situation.
5 Best Crypto Compound Interest
The five platforms listed below became the best crypto interest account providers for 2022.
- DeFi Swap
Crypto Compound Interest Calculator
Below is the list of compound interest calculators:
The Calculator Site
This calculator is used to work out the daily interest for a fixed number of days or months. The calculator is useful for bitcoin and other cryptocurrency trading.
Compound Daily Interest Calculator
It is used for Compounding interest. it is very easy to use.
In summary, cryptocurrency interest accounts give you the best of both worlds. Not only can one invest in their favorite digital currencies with the hope that the value of the token will increase over time, but they can also earn regular interest on their holdings.
And when you compare this to the traditional bank accounts, cryptocurrency interest accounts offer much more attractive yields.
To get started with the best cryptocurrency interest account for 2022, consider Aqru. This trusted platform offers an APY of 7% on both Ethereum and bitcoin and 12% on stable coins like USDC and USDT.
Let’s have your view on compound Interest and how to earn compound interest on crypto in the comment section below.
Watch the video below to learn how to earn compound interest on crypto:
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