After surpassing $1 billion last August, the capitalization of the stablecoin PYUSD has now fallen by more than 40%. What explains this decline?
The capitalization of the PYUSD has collapsed for several weeks
At the end of May, the PYUSD stablecoin from PayPal and Paxos marked the Consensus 2024 event in Austin, with the announcement of its arrival on the Solana (SOL) blockchain. This gave significant momentum to the adoption of the asset, because a few months later, it reached a capitalization of more than 1 billion dollarswith a record on August 29.
💡 Find our detailed explanations on the PYUSD stablecoin
However, this increase only seems to have been short-lived, because this same capitalization has today completely erased its progression from the month of August, returning to $611 million, namely its level at the end of July. :
Evolution of the capitalization of the PYUSD
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One of the reasons for this sudden loss of interest may be found in the drop in incentives on the different protocols on Solana (SOL). Indeed, in order to encourage the adoption of the stablecoin, users of certain decentralized finance applications could see the return on their positions increased thanks to bonuses in PYUSD. As such programs are generally ephemeral, popularity for one asset over another may then be only temporary.
This was particularly the case for the lending and borrowing protocol Kamino, whose drop in PYUSD capitalization was proportional to the drop in incentives on the application, as noted by Haseeb Qureshi, managing partner for the fund. Dragonfly investment:
PYUSD circulating supply has completely round tripped as the @KaminoFinance incentives they were blasting out have tapered off.
What's the lesson here? pic.twitter.com/chcVikOKTr
— Haseeb ＞|＜ (@hosseeb) October 16, 2024
As of today, PYUSD has a capitalization of $333.12 million on Ethereum (ETH), compared to just over $277 million on Solana. Compared to other dollar-backed stablecoins, the asset is positioned in 6th place in its category.
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Despite this drastic drop, this same capitalization increased by 368% in one year, in continuation of PayPal's developments within the crypto ecosystem. Thus, a point can be made again in a few months, to judge the trend concerning the PYUSD.
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Source: CoinGecko
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Since 2021, I have devoted my free time to seriously educating myself on cryptocurrencies in order to acquire maximum knowledge and credibility. I often have the opportunity to conduct interviews with influential figures in the blockchain industry. I also conduct in-depth analyzes on Web3 themes to offer exclusive content to Cryptoast readers.
Vincent Maire
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