PayPal’s PYUSD stablecoin has lost nearly 30% of its market capitalization over the past 30 days, dropping from over $1 billion to $712 million as of September 25, according to on-chain data.
The decline was mainly caused by a significant reduction in its market capitalization on Solana, which represented approximately 65% of the total market capitalization on August 26.
PYUSD in circulation or locked in the Solana ecosystem fell from $662 million to $364 million as of September 25. In comparison, its market cap on Ethereum remained stable over the period at $340 million.
Nonetheless, the average daily transfer volume for PYUSD has remained relatively high over the past 30 days, according to data from Artemis. The stablecoin recorded an average daily transfer volume of $242.2 million, which is only $11.6 million lower than the daily average between July 28 and August 25.
Although it is not uncommon for the stablecoin market caps fluctuate, the negative gap in PYUSD market cap occurred in tandem with growth of nearly 1.6%, or $3 billion, in the global stablecoin market.
Reduction of incentives
This drop is likely due to the drop in DeFi yields, which have fallen by nearly 50% over the period. The yield offered for providing PYUSD as collateral on Kamino is down by nearly 50%, to 7.6% as of September 24, from 14% at the end of August.
As a result, the total amount of stablecoins locked in the protocol dropped by 30%, from $430 million to $296 million.
Despite the drop, PYUSD remains the third-largest stablecoin by market cap within the Solana ecosystem, behind Tether USD (USDT)’s $728 million share and USD Coin (USDC)’s $2.6 billion size.
It is worth noting that the reduction in incentives could be related to the series of partnerships that PayPal is entering into regarding PYUSD. As Fortune reported on August 22, PayPal has partnered with Anchorage Digital to offer stablecoin rewards.
PayPal could therefore split its incentive allocations into different fronts, hoping to generate interest in various crypto-related areas.
Additionally, PayPal announced on September 25 that it would allow business accounts located in the United States to buy, sell, and hold cryptocurrencies, as reported by Bloomberg.
