What happened to the PayPal stablecoin PYUSD after its launch last year?

PayPal Stablecoin PYUSD Market Cap Hits $300 Million in Five Months

PayPal’s entry into the stablecoin market on August 7, 2023 was welcomed by many in the industry, with Circle CEO Jeremy Allaire saying the competition from PayPal was “great”.

News of the launch led to a modest 4% increase in the price of bitcoin, and within days, exchanges were offering low-fee promotional opportunities for traders willing to use PayPal’s PYUSD.

By the end of August, Coinbase, Kraken and HTX had gone live with the stablecoin, and Venmo support was added a month later.

Five months after its launch, PYUSD now occupies the eighth spot on the global stablecoin charts and passed the $300 million mark around January 22nd. However, PYUSD fell to 11th place overall in terms of volume, with only $10 million in 24-hour volume. This puts it just slightly ahead of UST Classic, which is priced 98% below its original $1 peg, and has only lost $500,000 in volume over the past day.

Stablecoins by Market Capitalization (Source: CMC)

Nonetheless, the climb in the value of PayPal’s PYUSD peg to $300 million in five months is very impressive. In addition to the increase in market capitalization, the token’s on-chain activity has been steady, with between 200 and 400 transactions per day.

PYUSD transfers since launch (source: Etherscan) Whatsminer Miner

However, as the table and charts below show, PYUSD has yet to break into the DeFi space in any meaningful way. the majority of PYUSD’s liquidity resides on centralized exchanges, with Crypto.com reportedly being the largest single holder of the token, valued at $113 million, or just over one-third of the total market capitalization.

PYUSD Holders (Source: Arkham Intelligence)

The visualization below depicts PYUSD-specific transactions between major entities. Entities holding larger amounts of PYUSD are larger than those holding smaller amounts. The entity without a logo on the far right is an unknown wallet holding more than $30,000. The logo in the upper right corner depicts business entity tokens, possibly inventory assets.

PYUSD ecosystem diagram (source: Arkham Intelligence)

Interestingly, there are multiple links between PYUSD issuers Paxos, Uniswap and Curve. However, these entities are not subsequently linked to major exchanges, suggesting that PYUSD’s DeFi and CEX ecosystems are completely separate.Bitmain Miner

Although PayPal was subpoenaed by the SEC when PYUSD’s market capitalization was half of its current market cap, PayPal has reportedly complied with the request, but little has been heard about the matter since. The release of the filing also marks a local low for PayPal shares, which are up 24 percent since November.

In addition, PayPal Ventures has recently begun using the PYUSD stablecoin as a strategic investment mechanism, using it to take a stake in the institutional crypto platform Mesh, commented Amman Bhasin, Partner at PayPal Ventures:

“As the world of financial services undergoes rapid transformation, we believe that user ownership and asset portability will be a key component of product innovation, and cryptocurrencies will be the first beachhead for achieving this.”

So while PYUSD still has a long way to go before it catches up with giants like Circle and Tether, the debuting web2 disruptor is certainly cementing its place in the industry.