PayPal Stablecoin (PYUSD) Experiences Circulation And Market Cap Drop In March

In March, the circulation of PayPal USD (PYUSD), a stablecoin co-issued by the payment behemoth PayPal and the crypto enterprise Paxos, saw a significant drop.

The latest transparency report from Paxos regarding PayPal USD reveals that the stablecoin’s circulation for the month amounted to $188.5 million, representing a 39% fall from the figures recorded in the preceding month.

Despite Significant Growth At The Start Of 2024, PYUSD’s Market Cap Has Been On A Downward Trend

CoinGecko’s recent statistics show a decline in the market capitalization of PYUSD from its peak in late February, when it reached a record high of $312 million on February 26.

The circulation of PayPal USD (PYUSD) was at its highest in February at $304 million, following a close second at $301 million in January, marking a noticeable downturn in March.

The start of 2024 saw PYUSD’s market value doubling in roughly a month by mid-January, yet its market cap has been decreasing ever since.

The current market cap of PYUSD is reported to be $194 million, which is a 3% uptick in the last week. This decrease in market cap comes during a general uptrend in the cryptocurrency markets, with Bitcoin (BTC) reaching new highs of over $73,000 on March 13.

As of March 29, the treasury of PayPal USD holds $14.9 million in U.S. Treasury bonds, with their market value estimated at about $14.8 million.

PYUSD collaterals

The report also highlights the employment of Reverse Repurchase Agreements by Paxos. These agreements involve the sale and subsequent repurchase of securities on an overnight basis with trusted financial entities, secured by U.S. Treasuries.

Paxos is positioned to sell the U.S. Treasury securities in case of a default by the other party, thereby considerably lowering the financial risk.

The total market value of PYUSD’s collateral in these agreements, backed by U.S. Treasury bonds, is valued at $177.9 million, with the notional value of the positions being approximately $174 million.

PYUSD’s total net assets are calculated at $192 million, with a notional value of the positions at $189 million, indicating a significant financial backing for the currency.

PYUSD Was Designed For Digital Payments And Web3

In August 2023, PayPal partnered with Paxos Trust and created the PayPal USD stablecoin, designing it to be used in digital payments and the Web3 space. PYUSD maintains a stable 1:1 value with the U.S. dollar, supported by assets such as U.S. dollar deposits, short-term Treasury bills, and other equivalent cash assets.

Within eight months of its introduction, PYUSD has climbed the ranks to become the 13th largest stablecoin by market capitalization, surpassing both Paxos’ own Pax Dollar (USDP) and the Gemini Dollar (GUSD).

Despite its success, PYUSD’s market capitalization represents only 0.18% of that of Tether’s USDT, the market leader with a valuation of $106.6 billion. The total market capitalization of stablecoins reached $155 billion at the time of reporting, highlighting the competitive landscape in which PYUSD is venturing.