What is compound interest in crypto?

Compound interest in crypto means earning returns on both your initial investment and all previously accumulated gains. For example, if you earn 10% APY on $1,000, after year 1 you have $1,100. In year 2 you earn 10% on $1,100 (not just $1,000), giving $1,210. Over 10 years at 10% APY, $1,000 grows to $2,594 — versus only $2,000 with simple interest. Compounding is why starting early matters so much.

What APY is realistic for crypto compounding?

Realistic, sustainable APY ranges in 2026: Ethereum liquid staking (3–5%), stablecoin lending on Aave/Compound (3–8%), Curve stablecoin LP (5–12%), Bitcoin yield products (1–3%). Yields above 20% APY typically carry significant smart contract risk, protocol risk, or token emission risk. The calculator lets you model any APY — use conservative estimates to stress-test your projections.

How often should I compound my crypto returns?

For most DeFi protocols, compounding frequency is determined by the protocol itself (e.g., Aave accrues interest every block). For manual strategies like selling options or collecting LP fees, weekly or monthly compounding (reinvesting earnings) is practical. The mathematical difference between daily and monthly compounding is small for moderate APYs — consistency matters more than compounding frequency.

What is the difference between APY and APR in crypto?

APR (Annual Percentage Rate) is the simple interest rate before compounding. APY (Annual Percentage Yield) includes the effect of compounding. A 10% APR compounded daily is approximately 10.52% APY. Most DeFi protocols display APY (which includes auto-compounding), but some display APR. When comparing yields, always compare APY to APY or APR to APR for an accurate comparison.

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Crypto Compound Interest Calculator

Project portfolio growth using compound interest. Enter initial investment, monthly contribution, APY, and time horizon.

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How This Tool Works

Compound interest is the process of earning returns on both your initial investment and accumulated gains over time.

A = P × (1 + r/n)^(n×t) + PMT × [((1 + r/n)^(n×t) − 1) / (r/n)]

Where: P = Principal, r = Annual rate, n = Compounding frequency, t = Years, PMT = Monthly contribution.

Even modest monthly contributions dramatically accelerate portfolio growth over multi-year horizons — the earlier you start, the more powerful the effect.

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