The USD stablecoin PYUSD launched by payment company PayPal reached a market capitalization of 1 billion USD at the end of August this year, becoming the fourth largest stablecoin, but its market share has been decreasing since then. Haseeb Qureshi, managing partner at venture capital firm Dragonfly Capital, believes that the decline in lending yield opportunities in the Solana ecosystem's decentralized finance (DeFi) protocols is a reason for this trend.
According to data from DefiLlama, the current market capitalization of PYUSD is 618 million USD, having decreased by 40% over the past month and a half. Notably, the circulating supply of PYUSD on the Solana chain has decreased by nearly 28% in the past month.
According to previous reports from Zombit, PayPal partnered with stablecoin issuer Paxos in August 2023 to launch PYUSD on the Ethereum mainnet for the first time. Shortly after, the company hired liquidity management provider Trident Digital to help promote the use of PYUSD. After the Solana version of PYUSD was launched in May this year, PayPal seemed to shift its focus from Ethereum to Solana, and in August, the total value of PYUSD on the Solana chain first exceeded its value on Ethereum.
The growth of PYUSD is primarily driven by the collaboration between PayPal and the Solana lending protocol Kamino Finance, which agreed to pay high yields subsidized by PayPal to PYUSD holders. In recent weeks, the deposit yield for PYUSD on Kamino has dropped from about 17% to below 7%, and the double-digit annualized yields on the Drift and Marginfi protocols on Solana have also declined.
Haseeb Qureshi from Dragonfly Capital stated on the social platform X:
"As the incentives provided by Kamino Finance gradually decrease, the circulating supply of PYUSD has completely fallen back. What lessons can be learned from this?"
However, this trend may reverse. This Tuesday, Kamino's "Altcoin Market" added PYUSD, allowing users to collateralize loans using their WIF, POPCAT, and BONK meme coin positions. This program will pay an additional total of 10,000 USD in PYUSD rewards to depositors each week. In comparison, the deposit yield for PYUSD on the Ethereum-based lending protocol Aave is about 4.3%.