What is Annual Percentage Rate (APR)?
Let's find out Annual Percentage Rate (APR) meaning, definition in crypto, what is Annual Percentage Rate (APR), and all other detailed facts.
The annual percentage rate (APR) is the monetary value or reward earned by investors who make their crypto tokens accessible for loans, accounting for interest rates and any additional fees paid by the borrowers.
Various platforms encourage their clients to stake their crypto assets by offering a high APR. The annual percentage rate is exclusive of compound interest.
Some cryptocurrency exchange platforms do not allow users to lend out their crypto coins. Exchanges that allow such services offer varying loan rates. The rates fluctuate depending on the cryptocurrency used for the loan or which type of loan was agreed on.
There are two main loan types used by cryptocurrency exchange platforms:
- Fixed lending. This type of lending is similar to a certificate of deposit granted by a bank. The money is secured for a set period of time at a fixed rate. The security is typically granted for seven to ninety days. It pays a greater rate of interest if the borrower does not use the cryptocurrency in any way.
- Flexible lending. This loan type functions similarly to a savings account. The borrower can withdraw the cryptocurrency at any point. Flexible lending offers lower rates of return.
One of the platforms offering fixed and flexible financing for customers is Binance. It is the world’s largest cryptocurrency exchange platform by volume. Loaning is available via Binance Earn services.
Cryptocurrencies are very volatile. Therefore, the amount of interest earned can vary significantly. Cryptocurrency lending schemes can attract investors looking into long-term crypto holding, as this sort of passive income adds value to the portfolio.
The frequent price changes of Bitcoin (BTC) and other cryptocurrencies mean that the revenue is directly impacted. Those partaking in fixed lending programs can notice value fluctuations in their portfolios as the coins secured for a set period of time cannot be exchanged.