What is Basis Point?
Crypto Glossary Definition
A basis point is one hundredth of a percentage point (0.01%).
Why Basis Point Matters
A basis point (bps) is one-hundredth of a percentage point (0.01%) — traders use it to describe small percentage changes precisely, since saying "the fee is 25 basis points" is less ambiguous than saying "a quarter of a percent."
Basis Point in Practice
A crypto lending platform advertises a borrowing rate described as 450 basis points on stablecoin loans, and a new user unfamiliar with the term pauses to work out what that actually means before committing funds. After a quick search, they learn that a basis point equals one-hundredth of a percentage point, so 450 basis points simply translates to an annual interest rate of 4.5 percent, expressed this way because it avoids the ambiguity of describing an increase from four percent to four and a half percent, which could be misread as either an absolute or relative change depending on how it's phrased. Later, while comparing two competing exchanges' trading fee structures, the same user notices one platform charges 10 basis points per trade while another charges 25, and quickly recognizes the second is two and a half times more expensive, a comparison that would have taken more mental math if expressed only in decimal percentages. The precision becomes especially useful when the user starts following interest rate policy discussions related to stablecoin yields, where analysts routinely describe rate changes in terms of basis points moved up or down, a convention borrowed directly from traditional finance that carried over into crypto lending and yield markets as those products matured and started resembling conventional fixed-income instruments more closely.
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