With the spread of cryptocurrencies, many Ponzi schemes have spread that guarantee astronomical sums. These are sites that do not produce any profit: simply the money of those who sign up is used to pay old members. Generally sustainable returns in stablecoin are of the order of 3-4-5% per year, for crypto/tokens the % can be slightly higher. For these reasons, when you read percentages of the order of 1% per day, 3% per day, 10% per day they are obviously all scams or at best pyramid schemes. This also applies to any Bot Trading system. Even a 5-10% weekly, in the Trading field, is completely unreal because by continuously re-investing these figures you would reach astronomical sums in a year but let's look at some examples to understand what we are talking about.
The formula to use is this:
“Total Annual Earned = Initial Capital * (1 + Daily Rate)^Number of Days”
-Let's assume that a platform gives 2% per day and an invested sum of $50. With $50 you would make $68,870 in one year
-Let's take an example again with $50 invested and an income of 5% per day for a year. In one year, exponentially reinvesting the profits, you would make: $50 * (1 + 0.05)^365=$271,059,207 (!!!)
-Let's now assume 17% per day with only $1 invested: $1 * (1 + 0.17)^365= 7,723,951,501,068,598,000,000,000 (a number so large that it is difficult to read and several tens of billions of times greater than the entire wealth global produced on planet Earth which is 463.600 billion dollars)
-Finally, a final example, always a $1 investment with a monster return of 100% per day (i.e. every day the capital doubles): $1 * (1 + 1.00)^365. You would get 1.1478 followed by 110 zeros (starting with just $1)
The exponential nature of this is evident by increasing the % per day and note that we are talking about small sums (in the examples an investment of 50 and 1$ was assumed). Even 5% for each successful operation with Trading or arbitrage systems are clearly unsustainable and unreal % (also because larger sums than the examples cited above are used).
AUTOCOMPOUND WITH REAL INCOMES
We close by hypothesizing compound interest, imagining that we always self-compound daily with a real return (5% per year). The formula to use is this:
Total amount earned= Initial principal (1 + annual interest rate in decimal form/number of times interest is compounded)^(number of times interest is compounded*years)
If we have 5% per year with daily auto-compounding we obtain in 3 years: A = $1,000 * (1 + 0.05/365)^(365 * 3)=$1162.82. Looking year by year we would have:
-At the end of the first year, you have $1,000 * (1 + 0.05/365)^(365 * 1) ? $1,051.27
-At the end of the second year, you have $1,051.27 * (1 + 0.05/365)^(365 * 1) ? $1,105.16
-At the end of the third year, you have $1,105.16 * (1 + 0.05/365)^(365 * 1) ? $1,161.82
Without using compound interest, you would have $1,150 in one year ($50 per year more). That is 5% per year of $1,000. If the interest is compounded monthly (12 times in 1 year), 12 (months) should be entered in the formula instead of 365 (days).
In any case, we note how compound interest slightly increases the capital earned by assuming real income, whereas abnormal figures are obtained by assuming non-sustainable income. Stay away from Ponzi Schemes with unsustainable returns!
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