Market
This is Why PayPal’s PYUSD Stablecoin Saw 40% Drop
PYUSD, PayPal’s dollar-backed stablecoin, dropped 40% in market cap since its high in August. Data suggests that this high only occurred due to high-yield financial incentives from Kamino Finance and others.
As these incentives tapered off, PYUSD’s summer growth evaporated almost completely.
The Rise and Fall of PYUSD
PayPal’s dollar-linked stablecoin PYUSD is undergoing a drastic decline in market cap. PYUSD was first launched in August 2023, and PayPal was quick to declare it fully backed with fiat. However, the stablecoin failed to win much significant adoption at first, only seeing steady yet meager supply growth.
Read More: How To Buy PayPal Stablecoin (PYUSD)
However, this summer, PYUSD saw a new wave of much larger success. Its market cap rose steadily from July to August, reaching all-time highs. By October, however, nearly all of this growth had faded, and PYUSD lost around 40% of its value from its August peak. What can explain this?
Haseeb Qureshi, managing partner at Dragonfly Capital, pointed out a possible cause for this decline via a social media post. Specifically, a big break for PYUSD adoption happened this May when it became supported on Solana’s blockchain. Moreover, Solana-based protocols such as Kamino Finance offered financial incentives with nearly 20% annual returns to use PYUSD.
“PYUSD circulating supply has completely round tripped as the Kamino Finance incentives they were blasting out have tapered off. What’s the lesson here?”, asked Qureshi.
In other words, the actual demand for PYUSD continued the same pattern of incremental growth during this period. However, the remarkable increase in supply was largely the byproduct of financial incentives like the ones Kamino and others offered. Without these promises of high yield, the coin’s market cap proved unsustainable, as with similar case studies.
Read More: 7 Best Crypto Platforms To Buy PayPal Stablecoin (PYUSD)
Moreover, PYUSD is also facing other challenges. For instance, PayPal has already received one subpoena over PYUSD; this may not be the end.
Disclaimer
In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and Conditions, Privacy Policy, and Disclaimers have been updated.