The bitcoin market’s meteoric rise over the last decade has been nothing short of incredible. The cryptocurrency market has expanded tremendously from a total market capitalization of $1.5 billion in 2013 to a total average market value of $1.8 trillion in 2021. Today, a number of cryptocurrency sub-categories, ranging from decentralized banking to gaming, collectively contain billions of dollars in trade volume, demonstrating how global interest in various aspects of cryptocurrencies has exploded. Each category has its own dedicated fan base, with developers from all around the world contributing to the application of blockchain technology to revolutionize many sectors.
DeFi’s Roots and PancakeSwap
Decentralized Finance (DeFi) is a potential field within the cryptocurrency market that promises to replace the global banking industry by eliminating the need for any central authority to handle people’s money. Individuals from all over the world donate their own funds to decentralized systems in order to create liquidity, which in turn allows the blockchain network to function successfully.
PancakeSwap is a cryptocurrency exchange where you can buy and trade various digital currencies. It is one of the most well-known examples of DeFi, in which people from all around the world donate money to keep the decentralized system based on blockchain technology running. PancakeSwap, which has been designated as an “Automated Market Maker (AMM),” pays investors that contribute liquidity to the exchange whenever fresh blocks are generated. It’s best described as a profit-sharing scheme in which investors can calculate their estimated return using terms like “APY” and “APR.” On average, investors get more than a startling 50% return on their investment, with some pools earning as much as 100% or even more. This article walks you through the complete process of making whopping APY with PancakeSwap. So, here’s how you can get started.
What is PancakeSwap’s Annual Percentage Yield (APY)?
The return on investment is calculated using the Annual Percentage Yield (APY), which takes compound interest into account. To put it another way, APY takes into consideration the amount that is constantly gained on your principal amount as interest to be reinvested in the staking pool while staking on PancakeSwap. Consider it “interest earned on your interest.” When an investor invests a particular principal amount in a staking pool and selects “auto-compound,” the APY is calculated.
Take, for example, a $1000 investment in staking CAKE in the Syrup Pools’ “automatic restaking” feature. Assume you each earn $1 in interest each day for the sake of argument. The $1 you make each day will be automatically reinvested with your principal investment thanks to automated restaking. This is how your ROI is calculated using APY. On PancakeSwap’s Syrup Pools, the automatic restaking feature appears as follows:
What is an APR?
The return on investment is calculated using the annual percentage rate (APR), which does not take compound interest into account. While staking on PancakeSwap, APR will assist you in calculating the amount of interest you will receive on your main investment without taking into account any earned interest that will be reinvested with the principal investment. Take a $1000 bet on PancakeSwap as an example. Let’s pretend you get $1 in interest every day. This $1 will not be re-invested into the original $1000, unlike APY.
APY vs. APR
When you stake any cryptocurrency on PancakeSwap, you have the choice of using either APY or APR. If you look at all of the Syrup Pools on the exchange, you’ll notice that APY has a better return on investment than APR owing to compound interest.
Is It Possible to Get an APY of 89% by Staking on PancakeSwap?
PancakeSwap’s annual percentage yield (APY) varies depending on the number of cryptocurrencies held on the exchange. As the number of persons who stake increases, the exchange’s liquidity requirements reduce, and the reward paid decreases as well. When the exchange first opened, the APY was greater than 100 percent. The current APY on the exchange’s native token CAKE is still a whopping 74.15 percent, as can be seen by visiting the official webpage.
When the investor considers the cost of the cryptocurrency itself, in addition to the APY supplied by the exchange, the investor can earn a larger rate of return. If the current market price of CAKE is $20, the prize could grow after a year if the currency appreciates in value. At the time of writing this article, the all-time high for CAKE was $42.59, which is more than 100 percent more than its current price. We may include in this 100 percent return on top of the 75.14 percent return achieved through staking over the long run if the exchange continues to increase usefulness. As a result, the overall return on investment exceeds 150 percent.
After I’ve Locked the Cryptocurrency on Pancakeswap, Can the APY Be Visible on the Exchange Change?
While the rewards available for staking on PancakeSwap are much higher than average stock market returns, the hazards are just as severe on the opposite end. This is due to the fact that the APY displayed on the exchange can fluctuate when more people join a given staking pool. To combat this, it is suggested that investors enable auto-staking in order to benefit from compound interest and maximize their earnings while the present APY is still high.
Is the APY for each Cryptocurrency on PancakeSwap different?
Yes, the APY (and APR) for each staking pool changes according to the different circumstances surrounding each cryptocurrency (total supply, needed liquidity, total staked cake, etc.)
Final Thoughts
Due to the groundbreaking technology that shows promise for the future of the global financial industry, the Decentralized Finance (DeFi) section of the entire cryptocurrency market is seeing a boom in demand. When comparing the market capitalization of cryptocurrencies to that of other markets, it is clear that there is a lot of space for future growth and investment.
Individuals investing now are still early adopters, and staking today appears to be a promising area where early adopters can profit from the large profits available, particularly on PancakeSwap. Staking payouts on the decentralized exchange are still among the best in the DeFi ecosystem. Staking might be a relatively low-risk option for investors wishing to take advantage of the present high APY being provided in the bitcoin market.