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PayPal’s PYUSD Report Provides Valuable Insight Into The Stablecoin’s Performance So Far

A new report has shown that the adoption of PayPal’s PYUSD stablecoin has seen less than favorable adoption rates since its inception. The crypto community remains skeptical about employing the new stablecoin for daily crypto payments and has opted for top competitor stablecoins like USDT and USDC. 

PYUSD Experiences Sluggish Adoption Rate

Global payments giant PayPal released its transparency report for its stablecoin, PYUSD, and the analysis of the report reveals that the PYUSD stablecoin may not be seeing as much adoption as PayPal and PYUSD stablecoin issuer, Paxos hoped for. 

Paypal launched the US dollar-backed stablecoin on August 7 which was designed to increase stablecoin offerings and facilitate the adoption of crypto payments to crypto users as well as consumers and merchants actively utilizing PayPal’s financial platform globally.

However, despite coming from one of the largest players in the payments space, the PYUSD stablecoin remains a relatively small player in the cryptocurrency market, especially when compared to industry heavyweights like Tether (USDT) and USD Coin (USDC).

A Kaiko analyst, Desislava Aubert stated to Decrypt that despite being listed on prominent exchange platforms like Coinbase and Huobi Global, the PYUSD stablecoin’s adoption rate has been progressing slowly, and its daily trade volumes have been fairly low. 

“PYUSD was listed on some centralized exchanges in late August, notably Coinbase and Kraken, but its daily trading volume has been volatile and significantly lower than other stablecoins. Overall, this points to sluggish demand,” Aubert stated. 

The PayPal USD stablecoin was issued by Paxos Trust Company, a technology company specializing in blockchain in August. Paxos has reported that it holds $45.3 million in assets supporting the PYUSD stablecoin. 

The stablecoin is also reportedly backed with over $1.5 million in cash deposits. The majority of the coin’s reserves, approximately $43.8 million have been collateralized with the US Treasuries as reverse purchase agreements. 

Currently, PYUSD has a market capitalization of $44 million, suggesting that the stablecoin’s adoption rate has been subpar due to its failure to catch and retain the attention of the crypto community. 

Crypto Investors Opt For Top Stablecoins

The decline in acceptance and adoption of the PYUSD may be attributed to the unfamiliarity of the cryptocurrency as a new stablecoin. The stablecoin market is also heavily saturated with well-established cryptocurrencies like USDT, USDC, and others. 

Given this, a large number of crypto investors are presently opting for these top stablecoins to facilitate their cryptocurrency transactions. This is further propelled by the fact that these stablecoins have created a considerable reputation for themselves over the years due to their reliability and sustainability.

Presently, USDT has a market capitalization of over $83 billion and USDC has a market cap of $26 billion. At the time of writing, USDT stablecoin’s 24-hour trading volume is over $22 billion as compared to PYUSD stablecoin’s 24-hour trading volume of only $3.2 million. 

Despite PYUSD’s sluggish adoption rate, PayPal remains committed to its cryptocurrency ventures. The payment giant has expanded into different regions globally using its brand name and reliable reputation as an international financial service provider to facilitate crypto adoption and awareness among users in different countries.

PayPal PYUSD price chart from Tradingview.com (Stablecoin)

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PayPal’s PYUSD Fails To Capture Interest: 90% Of Supply Remains In Paxos’ Wallet

Paypal’s Ethereum-based stablecoin PYUSD has failed to capture crypto investors’ interest. According to data from Nansen, 90% of the stablecoin’s total supply still remains with its issuer Paxos’ wallet.

Paypal’s PYUSD Adoption Setback

The payment giant Paypal’s recently launched stablecoin PYUSD continues to struggle with adoption and has failed to gain traction since its official launch on August 7, 2023.

Despite PayPal having over 350 million users worldwide, on-chain data from Nansen has shown that only a small percentage of its user base is currently using and holding the PYUSD in self-custody wallets.

“On the surface there’s a lack of demand from crypto users for PYUSD when other alternatives exist,” said Nansen in a report.

However, it is believed that lack of enthusiasm might involve the stablecoin’s lack of utility and not being able to earn interest on the stablecoin, as highlighted by an X (formerly Twitter) user in a post on August 26, 2023.

The stablecoin’s holdings on crypto exchange wallets are also low, accounting for just about 7% of the stablecoin’s total supply. This percentage takes into account the balances on centralized exchanges such as Kraken, Crypto.com, and Gate.io.

Despite the high expectations in the crypto industry following the release of the stablecoin that it would actually promote wider adoption and introduce cryptocurrencies to the masses for the first time, the stablecoin has failed to live up to expectations and smart money investors seem perfectly comfortable to circumvent the stablecoin. 

The largest holder of the stablecoin holds less than $10,000 worth of PYUSD after the holder sold about 3 meme coins to purchase the stablecoin. Excluding contracts or exchanges, not more than 10 holders have a balance surpassing $1,000.

According to Coinmarketcap, PYUSD has a total supply of 43 million PYUSD tokens and pools in decentralized exchanges like Uniswap’s PYUSD/USDC and PYUSD/wETH accounts to only 50,000 PYUSD tokens respectively.

The PYUSD tokens have been criticized for being overly centralized, as the majority of its total supply turns out to be stored on centralized exchanges, resulting in difficulty in growing its circulation.

Despite such a high total supply, the collective total number of the stablecoin’s holders according to Etherscan is merely 324 at the time of this writing.

PayPal's PYUSD price chart from Tradingview.com (PayPal stablecoin)

Expectations On Ethereum For The Stablecoin

According to JP Morgan analyst Nikolaos Panigirtzoglou, following the first week of Paypal’s stablecoin launch, Ethereum enjoyed no benefit from PYUSD when looking at things such as increased network activity, increased Total Value Locked (TVL), and enhancing Ethereum’s network utility as a stablecoin/DeFi platform.

Crypto experts and enthusiasts have also criticized PayPal for choosing Ethereum for its stablecoin due to the blockchain’s high transaction fees.

Co-founder of Sei Network Jayendra Jog said, “The gas fees of using PYUSD will be ridiculous, which will disincentivize its usage.”

He further added, “To help make the user experience better, PayPal will either need to subsidize transaction costs or will need to help support PYUSD on other networks with cheaper gas fees.”