PayPal USD Surpasses $1B Market Cap As Solana Surge Continues

PYUSD, the stablecoin issued by PayPal, the global online payments giant, now boasts a ten-figure market cap.

Data from CoinGecko shows PYUSD’s market cap pushing past $1 billion on Aug. 24, with the milestone coming roughly 12 months after the token’s launch last August. PYUSD ranks as the sixth-largest stablecoin behind Ethena USDe (USDE) with $2.94 billion and above Tron’s USDD token with $747.3 million.

PYUSD is also the fifth-fastest stablecoin to attract a $1 billion capitalization. Ethena’s USDE was the fastest, surging to a ten-figure market cap less than three months after launching, followed by First Digital USD (FDUSD) in roughly five months, Terra’s UST token within six months, and Frax (FRAX) at 11 months.

PYUSD on Solana surges

PayPal USD’s growth has been propelled by its deployment on Solana, which occurred on May 29. At the time, PYUSD’s market cap was $399 million.

Solana accounts for 64% of PayPal USD’s $1.01 billion market cap with $647 million. PYUSD ranks as the third largest behind USD Coin (USDC) with $2.55 billion and Tether (USDT) with $723.5 million.

PYUSD is now the fastest-growing stablecoin on Solana, adding $228 million to its market cap over the past seven days, followed by USDC with $27 million. If current trends continue, PYUSD will have overtaken USDT as Solana’s second-largest stablecoin.

Unsustainable incentives?

Some of Solana’s largest DeFi protocols were quick to offer enticing incentives for users to jump on the PYUSD bandwagon.

On July 10, Kamino, a money market protocol, doubled its incentives for PYUSD deposits. The protocol now hosts $432.6 million in PYUSD, with depositors earning boosted rewards in the form of 1.2 million PYUSD weekly — currently equating to a nearly 14.5% annual percentage yield (APY). The pool has a supply cap of 600 million PYUSD.

Two weeks later, MarginFi, a rival lending protocol, launched support for PYUSD alongside a hefty incentive campaign. Its $50 million PYUSD pool is currently maxed out, with depositors similarly enjoying a boosted APY of 18.5% in the form of PYUSD.

However, PYUSD borrowers are paying 3.28% at a 5.31% utilization ratio on Kamino and 1.54% at 4% utilization on MarginFi, begging the question of whether PYUSD can sustain its growth on Solana without the incentives currently offered by the network’s top lending protocols.

On Aug. 20, the popular web3 analyst, Alpha Pls, estimated Kamino is earning annualized revenue of $17.4 million, suggesting it will not be able to support the ongoing rewards boost for very long.