Compounding rolls each period's gain back into the principal so the next period earns on a larger base. Enter a principal, an assumed annual return and a number of years to see how far time and compounding frequency can push the number.
This is only an assumed figure to illustrate compounding — it doesn't mean you'll actually earn this return.
The assumed annual return is an example only, not a forecast. Crypto and stock prices are volatile; any given year may not be positive, and you can lose principal. Real returns follow no fixed rate — this model only helps you understand the power of compounding, and it is not a promise of profit.
| End of year | Value at year end | Gain that year | Cumulative gain |
|---|
Figures are computed to each year end at the selected compounding frequency, rounded to two decimals.
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Sign up on Binance with BN771 →The compound formula is simple: final value = principal × (1 + annual rate ÷ compounds per year) raised to the power of (compounds per year × years). In plain terms, every short stretch folds the gains you've earned back into the principal, and the next stretch earns on the larger base. The higher the frequency and the longer the horizon, the bigger the snowball — which is why people say time is compounding's best friend.
Here's a concrete contrast: at the same rate, simple interest only ever earns on your original principal, while compounding also earns on the money you've already made. Stretch the years out and the two pull apart clearly; the extra amount is entirely the contribution of interest on interest. The table above pulls this apart year by year, and you'll see the later years' gains getting larger because the base keeps growing.
But keep "assumed" and "reality" firmly apart. This tool uses a fixed annual rate to demonstrate the mechanics, whereas in the real world — especially crypto and stocks — no year is reliably positive. One year might soar, the next might halve; compounding is an accelerant on the way up and speeds up the erosion of principal on the way down. Extrapolating decades of wealth from an idealized fixed rate is a way to understand the principle, never a promise about the outcome.
A practical way to use it: first, keep the annual rate conservative — don't treat a short bull-market run as a long-term average. Second, understand that compounding's real barrier isn't the math but sticking with it uninterrupted over the long term, which DCA does best. Third, look at it alongside risk: only if you can withstand the drawdowns does compounding ever get a chance to pay off. To give compounding a chance to happen, see how the DCA Calculator smooths cost with fixed amounts, then read the Bitcoin DCA guide to build a long-term perspective.