# APR vs APY in Crypto: What Is the Difference and How to Convert

> APR is a simple annual rate, while APY includes compounding. Learn the formulas, how often crypto yields compound and how to compare funding rates fairly.

Updated: 2026-09-23

**APR (annual percentage rate) is a simple yearly interest rate that ignores compounding, while APY (annual percentage yield) includes the extra return earned by reinvesting interest.** For the same positive rate, APY is always equal to or higher than APR. The gap grows as the rate rises and as compounding becomes more frequent.

## Key takeaways

- **APR** = simple annual rate, with no reinvestment.
- **APY** = annual return with compounding.
- **APY = (1 + APR ÷ n)^n − 1**, where n is compounding periods per year.
- At low rates the difference is small; at high rates it is large.
- [Funding rates](/learn/what-is-funding-rate) are best compared as **APR**, because funding is not automatically compounded.

## The formulas

| Conversion | Formula |
|---|---|
| Per-period rate to APR | Rate × periods per year |
| APR to APY | (1 + APR ÷ n)^n − 1 |
| APY to APR | n × ((1 + APY)^(1/n) − 1) |
| Continuous compounding | e^APR − 1 |

Here **n** is the number of compounding periods per year: 12 for monthly, 365 for daily, 8,760 for hourly.

## Worked example: 10% APR

How much does compounding add to a **10% APR**?

| Compounding | n | APY |
|---|---|---|
| None (yearly) | 1 | 10.00% |
| Monthly | 12 | 10.47% |
| Daily | 365 | 10.52% |
| Every 8 hours | 1,095 | 10.52% |
| Hourly | 8,760 | 10.52% |
| Continuous | ∞ | 10.52% |

Going from monthly to daily compounding adds a little, but beyond daily the extra is tiny. On **$10,000**, 10% APR earns **$1,000** in a year without compounding, and about **$1,052** with daily compounding.

At higher rates the gap widens. A **50% APR** compounded daily is about **64.8% APY**, and compounded monthly about **63.2% APY**.

## Converting funding rates to APR

A funding rate is quoted per interval. To annualize it:

**APR = (rate ÷ interval hours) × 8,760**

| Rate | Interval | APR |
|---|---|---|
| 0.01% | 8h | 10.95% |
| 0.01% | 4h | 21.90% |
| 0.01% | 1h | 87.60% |

If you could reinvest every 8-hour payment of 0.01%, the APY would be (1.0001)^1,095 − 1 ≈ **11.57%**. In practice, funding lands in your margin balance and does not increase your position size unless you resize it, which costs fees. That is why ArbTide never compounds funding: the [live funding rates page](/funding-rates) shows each rate per 8 hours, and its APR is the simple, uncompounded annual figure. The [methodology page](/methodology) explains the calculation.

## Why APR and APY get confused

- **Marketing**: APY is the bigger number, so some platforms prefer to show it.
- **Variable rates**: a quoted APY on a variable yield assumes the current rate lasts a full year, which it rarely does.
- **Short windows**: annualizing a single high funding payment can produce a huge APR that lasts only hours. Checking [BTC funding history](/funding-rates/btc/history) shows how much rates vary over time.

## Using APR in real strategies

For a [cash-and-carry trade](/learn/what-is-a-cash-and-carry-trade) or a futures [basis](/learn/what-is-basis-in-crypto) position, annualized numbers help you compare opportunities with different lengths. Keep three points in mind:

1. **Fees are one-off costs**, while APR is a rate. A short hold can have a high APR but a small net profit after fees.
2. **Return on capital** is lower than APR on notional when you also post margin.
3. **Compare like with like**: convert every offer to APR, or every offer to APY, before choosing.

## Try it

Convert any rate with the [APR/APY calculator](/tools/apr-apy-calculator), or estimate funding income over a chosen period with the [funding rate calculator](/tools/funding-rate-calculator).

## Frequently asked questions

### What is the difference between APR and APY?

APR (annual percentage rate) is a simple yearly rate that ignores compounding. APY (annual percentage yield) includes the effect of reinvesting earnings, so it is always equal to or higher than the APR for the same positive rate.

### How do you convert APR to APY?

Use APY = (1 + APR ÷ n)^n − 1, where n is the number of compounding periods per year. For example, 10% APR compounded daily is about 10.52% APY.

### Are funding rates shown as APR or APY?

Funding rates are usually annualized as APR, by multiplying the per-interval rate by the number of intervals in a year. Funding is not automatically reinvested, so APR is the more accurate comparison unless you actively resize the position.

### Why do crypto platforms show APY instead of APR?

APY is always the larger number when the rate is positive, so it can make a yield look more attractive. Comparing two offers fairly requires converting both to the same measure.