TL;DR
- PayPal’s PYUSD stablecoin has seen its market cap drop by 30% over the past month.
- The drop is due to declining incentives in Solana’s DeFi ecosystem.
- PayPal continues to diversify its incentives with new strategic partnerships in the crypto sector.
Over the past month, the market cap of PayPal-issued stablecoin PYUSD has dropped dramatically, from over $1 billion to $712 million, according to on-chain data from DefiLlama as of Sept. 26.
This drop has been primarily attributed to reduced incentives within the DeFi ecosystem on Solana, where the stablecoin previously accounted for 65% of its total market cap.
Despite the volatility of some stablecoins, this drop in PYUSD value coincides with a 1.6% overall growth in the stablecoin market, making it even more significant.
PYUSD’s share on the Solana network fell from $662 million to $364 million, while its presence on Ethereum remained stable at $340 million.
One of the main factors behind this reduction has been the drop in yields from DeFi protocols.
On platforms like Kamino, where PYUSD was used as collateral, yields dropped from 14% in August to 7.6% at the end of September.
This triggered an outflow of capital from the protocol, reducing the total value locked in stablecoins from $430 million to $296 million.
However, PYUSD maintains its position as the third largest stablecoin within the Solana ecosystem, behind only USDT and USDC.
The impact of this drop on Solana, although significant, contrasts with the stability it has shown on Ethereum, which suggests that PayPal continues to bet on maintaining its participation in different blockchain networks.
Additionally, PYUSD’s daily transfer volume remained relatively strong, averaging $242 million daily over the past 30 days, showing that despite the drop in its market cap, it remains a widely used asset.
PayPal diversifies into the crypto sector with PYUSD
One possible explanation for the drop in DeFi incentives may be related to the new strategic partnerships that PayPal has been closing.
In August, the company announced a collaboration with Anchorage Digital to offer stablecoin-linked rewards, indicating that the firm is redistributing its incentives toward new areas of the crypto ecosystem.
With this strategy, PayPal appears to be diversifying its efforts to attract interest not only in decentralized finance, but in other facets of the sector.
Despite the challenges facing PYUSD in Solana’s DeFi ecosystem , PayPal continues to expand the use of its digital financial products.
On September 26, the company announced that US-based merchant accounts will now be able to buy, sell, and hold cryptocurrencies, which could increase the adoption of PYUSD in the broader market.
This measure is part of a context of growth for cryptocurrencies and stablecoins, where traditional companies such as PayPal are seeking to position themselves in a solid manner.
Although PYUSD has faced a notable drop in its market capitalization, PayPal continues to show a clear commitment to the evolution of cryptocurrencies and digital finance.
New initiatives and strategic partnerships could, in the long run, revitalize interest and adoption of its stablecoin across different ecosystems.
