PayPal’s stablecoin market cap has plummeted 40% since August to $618 million. Strategic partnerships and yield changes were impacting PYUSD’s competitiveness in the market.
PayPal’s dollar-pegged stablecoin PYUSD has faced a significant decline since peaking at over $1 billion at the end of August.
Once ranked as the No. 4 stablecoin, its market capitalization stood at $618 million at the time of writing, reflecting a significant 40% decline in just over a month. Masu.
This downturn highlighted the challenges PayPal’s token continues to face amid intense competition and fluctuating demand within the stablecoin market.
Source: Into the Block
journey so far
Launched on Ethereum (ETH) mainnet in August 2023 and later extended to Solana (SOL) in May 2024, PayPal’s USD initially showed great momentum, especially in Q3 2024.
By mid-August, the stablecoin supply on SOL even exceeded the presence on ETH, making it one of the fastest growing stablecoins during the same period.
In a notable milestone, the company’s market capitalization doubled from July to August, surpassing $1 billion for the first time.
However, recent performance has shown a setback, with the token reversing some of its initial gains last month.
Partnered with Kamino Finance
PayPal USD’s initial growth was significantly enhanced by a strategic partnership with Kamino Finance, a Solana-based lending platform.
The partnership offered attractive yields to PYUSD holders, and PayPal provided subsidies to boost returns.
At its peak, Camino offered a yield of around 17% on PYUSD deposits and collected significant interest.
However, in recent weeks, these returns have declined to less than 7%, impacting its attractiveness for PYUSD holders.
Other SOL-based platforms, such as Drift and Marginfi, which once offered similarly high returns, have also adjusted their annualized compensation. This points to a broader trend of decreasing incentives across these protocols.
Shedding light on this, Haseeb Qureshi, Managing Partner at DragonFly Capital, told X (formerly Twitter):
“The circulating supply of PYUSD has completely reversed as @KaminoFinance’s incentives have tapered off.”
However, this trend may be poised to change, as Kamino recently incorporated PYUSD into its “altcoin marketplace”, allowing users to borrow assets such as WIF, POPCAT, and BONK meme coins. .
This strategic addition brings new incentives, with depositors earning a total of $10,000 in additional PYUSD rewards each week, potentially increasing engagement and demand for the stablecoin.
Comparison of PYUSD to USDT and USDC
The decline in the market capitalization of PYUSD, and especially Solana, highlights the changing dynamics of the stablecoin market, in contrast to the stability of USDT and USDC.
PYUSD saw strong demand early on, but recent reductions in yield incentives have made it less attractive. As a result, Solana’s sales fell from $600 million to $267 million.
Ethereum, on the other hand, has around $350 million PYUSD in circulation, and the blockchain’s established DeFi infrastructure could give Ethereum a stronger foothold.
In contrast, USDT and USDC have maintained stable market capitalizations, highlighting their dominance and consistent demand across platforms.
Visa’s on-chain analysis further highlights the competitive environment for stablecoins as of October 16th, with USDC trading volume reaching $5.39 billion and USDT reaching $14.55 billion. revealed.
In stark contrast, PYUSD was a significant laggard, with trading volume of just $90.72 million.
Source:visaonchainanalytics
Despite this, PYUSD’s cross-chain market capitalization surged 375% year-over-year, according to CoinGecko data. This established it as the 9th largest stablecoin by market capitalization.
This impressive growth demonstrates strong resilience and future expansion potential in the rapidly evolving stablecoin ecosystem.
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