APR vs APY — and the price fall that erases both
Balance after 1 year
1,127.47
+127.47 interest
You put in 1,000
Effective 12.75% APY · 12.00% APR
APR quotes the rate before compounding; APY is what you actually end up with. Comparing one product's APR against another's APY invents a difference of 0.75 percentage points that is not there.
APR
12.00%
before compounding
APY
12.75%
what you receive
Difference
+0.75%p
at 365× per year
A 12.7% gain is erased by a 11.3% fall in the token — not a 12.7% one.
Advertised rates in crypto are paid in the token, so the yield increases the number of coins you hold rather than the value of your position. Whether that ends up profitable is decided almost entirely by the token's price over the same period, and price moves in this market are usually an order of magnitude larger than any rate on offer.
Beyond price, a rate says nothing about where it comes from. Lock-up periods, unbonding delays, smart-contract risk, validator slashing and the possibility that the rate is funded by token emissions rather than revenue are all invisible in the number. None of them are modelled here — this page only makes the arithmetic honest.
The first is the difference between APR and APY. APR is the rate before compounding, APY is what you actually receive once interest earns interest — 12% APR compounded daily is 12.75% APY. Products advertise whichever number looks better, so comparing one platform's APR against another's APY manufactures a gap that does not exist. This page converts both ways and shows the difference explicitly.
The second is much larger. Yield paid in a token increases the number of coins you hold, not the value of the position. A 12% return is erased not by a 12% price fall but by a 10.7% one, because the loss applies to the grown balance rather than to what you put in. And crypto price movement dwarfs any rate on offer: this page reads the coin's measured volatility and reports how likely that break-even fall is within a year.
Neither point argues against earning yield. They argue against reading the yield as the outcome. On an asset whose ordinary annual swing is fifty to a hundred percent, a double-digit rate is a rounding adjustment to a decision that was really about the token — and it is worth knowing that before locking anything up.
⚠️ Not investment advice. Lock-up periods, unbonding delays, smart-contract risk, validator slashing, and rates funded by token emissions rather than revenue are all excluded from this arithmetic. All decisions and risks are your own.
APR is the rate before compounding; APY is what you actually receive once interest earns interest. At 12% APR compounded daily the APY is 12.75%. Platforms advertise whichever looks better, so comparing one product’s APR against another’s APY invents a difference that is not there.
Because the fall applies to the grown balance rather than to what you put in. If your holding is 1.12 times its original size, dropping to 1/1.12 of that returns you to break-even, which is a 10.7% decline. Gains and the losses that undo them are never mirror images.
No. Yield paid in a token increases how much of that token you hold, which increases your exposure rather than reducing it. Whether the position ends up profitable is decided mostly by the token price over the same period.
Because it shows the scale of the two forces. Crypto assets commonly swing fifty to a hundred percent in a year, so a double-digit rate is a small adjustment to an outcome driven by price. The page reports the yield as a percentage of one year’s ordinary swing to make that concrete.
From the same model used across this site: the coin’s measured volatility with fat-tailed shocks, sampled over four thousand paths, counting how often the price touches the break-even level at any point within a year. It is monitored on daily closes.
Lock-up periods and unbonding delays, smart-contract failure, validator slashing, platform insolvency, and the possibility that a rate is funded by token emissions rather than revenue. None of them appear in an advertised percentage, and none are modelled here.