The market valuation of PayPal’s stablecoin, PYUSD, has faced a notable decline, plunging nearly 30% in the past month. As of September 25, the market cap has dipped from over $1 billion to $712 million, based on on-chain analytics.
This downturn has been largely attributed to a substantial decrease of its market cap on the Solana blockchain, which constituted about 65% of PYUSD’s total market cap on August 26.
As of September 25, the volume of PYUSD circulating or locked within the Solana ecosystem dropped from $662 million to $364 million. In contrast, its valuation on the Ethereum network has remained stable at $340 million throughout this period.
Stable Transaction Volume
Despite the declining market cap, the stablecoin has maintained a robust daily average transfer volume over the last 30 days. According to data from Artemis, PYUSD registered an average daily transfer volume of $242.2 million, which is only $11.6 million lower than its average from July 28 to August 25.
It’s common for stablecoins to experience fluctuations in their market caps; however, PYUSD’s decline occurred alongside an overall growth of close to 1.6%—approximately $3 billion—in the stablecoin market as a whole.
Impact of Decreased Yields
The recent decline can likely be traced back to a drop in DeFi yields, which have plummeted nearly 50% during this time frame. The yield from providing PYUSD as collateral on Kamino has decreased significantly to 7.6% as of September 24, down from 14% reported in late August.
Consequently, the total value of stablecoins locked within that protocol has diminished by 30%, falling from $430 million to $296 million.
Despite these challenges, PYUSD still ranks as the third-largest stablecoin by market cap within the Solana ecosystem, trailing Tether USD (USDT) at $728 million and USD Coin (USDC) at $2.6 billion.
Partnerships and Strategic Moves
Interestingly, the reduction in incentives may correlate with a series of partnerships that PayPal is forming concerning PYUSD. As reported by Fortune on August 22, PayPal announced a collaboration with Anchorage Digital to introduce stablecoin rewards.
This suggests that PayPal could be redistributing its incentive allocations across various initiatives, aiming to attract interest in a multitude of crypto-related areas.
Additionally, on September 25, PayPal disclosed plans to allow U.S.-based business accounts to buy, sell, and hold cryptocurrencies, according to Bloomberg.