PayPal’s PYUSD Stablecoin’s Market Cap Plummets 40% Since August Peak

PayPal’s stablecoin, PYUSD, has seen a sharp drop, with its market value shrinking by 40% since August when it topped $1 billion.

By October 16th  PYUSD’s Market Cap stood at $618 million, reflecting a significant decline in just six weeks. It now sits far below its August high, when it ranked as the fourth-largest stablecoin. Launched in August 2023 on the Ethereum network, PYUSD initially gained momentum. By mid-August, its supply on Solana outpaced Ethereum, signaling strong early adoption. A key factor in this growth was a partnership with Kamino Finance, a Solana-based lending platform. Kamino boosted PYUSD’s appeal by offering interest rates as high as 17%, funded in part by PayPal.

PYUSD Market Cap Drops Significantly

The PYUSD market cap has fallen by over 10% in the last week. Source: CoinGecko

In recent weeks, PYUSD yields have sharply fallen. Kamino Finance lowered the yield on PYUSD deposits from around 17% to under 7%, which has affected other Solana-based protocols like Drift and Marginfi, previously offering double-digit annualized returns. This reduction has made PYUSD less appealing to investors, causing its market cap to drop significantly.

Haseeb Qureshi, managing partner at DragonFly Capital, pointed out that the circulating supply of PYUSD has returned to its original state as Kamino’s incentives have diminished. His comments underscore how PYUSD’s market relies heavily on such incentives for its performance.

Despite the downturn, there are signs of potential recovery. Kamino recently introduced PYUSD to its “altcoin market,” where users can borrow against positions in memecoins like WIF, POPCAT, and BONK. This initiative includes an extra $10,000 in PYUSD rewards weekly for depositors. Meanwhile, PYUSD lenders on Aave, an Ethereum-based decentralized exchange, earn a more stable but lower return of about 4.3%.

While the market caps of stablecoins USDT and USDC have remained steady over the past six weeks, PYUSD’s Solana-based market cap dropped from over $600 million in August to around $267 million. On Ethereum, over $350 million worth of PYUSD tokens are still circulating.

Despite these declines, PYUSD’s total cross-chain market cap remains up 375% year-over-year, according to CoinGecko. This growth positions PYUSD as the ninth-largest stablecoin by market cap, suggesting that while short-term issues exist, the long-term growth outlook remains strong.

PayPal Expands Crypto Services for U.S. Businesses

PayPal is expanding its digital asset services by allowing U.S. business customers to buy, sell, hold, and transfer cryptocurrencies. This initiative aims to increase the use of cryptocurrencies among merchants, although it will not be available to business accounts in New York State initially.

Since 2020, when PayPal first enabled users to hold digital assets, the company has steadily broadened its offerings. Recently, PayPal launched PYUSD on both Ethereum and Solana, and now this new service for U.S. businesses strengthens its push to integrate crypto into everyday financial activities.

PayPal continues to grow its digital assets division through partnerships and new projects focused on increasing the use of PYUSD. PayPal also unveiled plans for U.S. business customers to use cryptocurrency for transactions, highlighting the advantages of stablecoins for faster payments and smoother cash flow.

Despite a recent dip in PYUSD’s market value, its year-over-year growth remains strong. PayPal’s focus on improving PYUSD’s functionality through partnerships and service expansions may help stabilize and boost its performance in the market.