PayPal's PYUSD Stablecoin Market Cap Plummets From $1B to $610M in Six Weeks

Once a top four stablecoin, PYUSD's value has plummeted from its August peak, suggesting a significant loss of investor confidence.

PayPal’s stablecoin, PYUSD, has seen a dramatic decline in market capitalization over the past six weeks. Once a top four stablecoin, PYUSD’s value has plummeted from its August peak.

The stablecoin, which is pegged to the U.S. dollar, saw its market cap drop from over $1 billion to around $610 billion at the last check. The decline has been attributed to a reduction in the interest rates offered at Solana-based decentralized finance (DeFi) platform Kamino Finance.

The platform helped fuel PYUSD’s rise with double-digit yields, allowing users to generate significant returns while holding onto the stablecoin. These yields were also seen across other DeFi platforms including Drift and MarginFi.

PYUSD circulating supply has completely round tripped as the @KaminoFinance incentives they were blasting out have tapered off.

What's the lesson here?

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However, these rates have since been reduced, leading to a decrease in demand for PYUSD and a subsequent decline in its market capitalization. Despite the downturn, there are signs that PYUSD could soon regain traction as Kamino has recently introduced PYUSD to its “altcoin market,” offering additional rewards for depositors.

PayPal expanded its PYUSD stablecoin to the Solana ecosystem earlier this year. The move saw the stablecoin become available to purchase, sell, transfer, and hold in PayPal and Venmo digital wallets. The stablecoin is also available for use at checkout at merchants that accept cryptocurrencies.

Solana is known for its ability to handle a high volume of transactions quickly and at a low cost. According to data from blockchain analytics platform Artemis, Solana is the most used blockchain for stablecoin transfers.

PayPal USD is issued and custodied by Paxos Trust Company, a fully chartered limited purpose trust company. It is subject to regulatory oversight by the New York State Department of Financial Services.

Reserves for PYUSD are fully backed by U.S. dollar deposits, U.S. Treasuries, and similar cash equivalents. PYUSD can be bought or sold through PayPal and Venmo at a rate of $1.00 per PayPal USD.

PayPal, Inc. is licensed to engage in virtual currency business activity by the New York State Department of Financial Services. It should be noted that buying, selling, transferring, and holding cryptocurrency with PayPal is not available in Hawaii and where prohibited by law.

Featured image via Unsplash.

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