The crypto community welcomed the news that PayPal, the $70 billion payments company, was launching an Ethereum-based stablecoin, predicting that the company's brand and large user base would prove a boon to crypto markets.
Three weeks later, PYUSD is increasing its daily trading volume to less than $10,000, and data from Nansen shows that only a handful of wallets hold the token worth more than a thousand dollars.
DeFi users in particular are avoiding PayPal's stablecoin, with the largest non-exchange wallet holding $500,006 PYUSD, followed by just $9,861 and $8,500. Only 39,750 PYUSD is held in Uniswap liquidity pools.
“Currently, very few people use and hold PYUSD in their self-managed wallets,” Nansen said. “On the face of it, there is a lack of demand for PYUSD among crypto users when there are other alternatives.”
Paxos, the issuer of PYUSD, holds 89% of the circulating supply, followed by centralized exchanges Kraken and Coinbase with 6.6% and 2.6%, respectively. Only 10 wallets currently contain more than 3,000 PYUSD tokens.
Top wallets by PYUSD balance
On August 7, PayPal announced that US users with a PayPal Balance account will be able to purchase, spend and trade PYUSD “in the coming weeks,” meaning that PYUSD's poor adoption is not due to users not accessing it can.
Tether dominance is rising
Still, PayPal may not be deterred by DeFi locals’ indifference toward PYUSD.
According to an Aug. 29 report from Binance, centralized tokens account for 92% of the $124.4 billion in total stablecoin capitalization, with market makers operating on centralized exchanges among the asset's largest adopters.
PayPal likely sees an opportunity to keep pace with the declines in USDC and BUSD. USDC supply is down 40% after numerous redemptions since the depegging in March, while BUSD's capitalization has plunged 87% since New York regulators ordered Paxos to stop issuing the token in February .
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Tether's market cap has increased 23% in the last 12 months and now accounts for two-thirds of the stablecoin market. However, Tether's dark past and shifting reserves could deter some virtual asset providers seeking regulators' blessing from adopting the token, creating opportunities for companies like PYUSD to capture market share.
According to CoinGecko, the market cap of decentralized stablecoins took a hit following the collapse of Terra's UST token last year and has continued to decline along with a 56% decline in DAI's market cap since the start of 2022.
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