Nansen Report: Initial Adoption Challenges Faced by PayPal’s PYUSD

The recently introduced stablecoin by PayPal, known as PayPal USD (PYUSD), is encountering obstacles in gaining widespread acceptance, as indicated by on-chain data analysis conducted by Nansen. The report highlights a striking observation that approximately 90% of PYUSD tokens are currently held within the wallets of Paxos Trust, the stablecoin’s issuing entity.

A notable percentage, nearly 7% of the total supply, resides in wallets associated with prominent cryptocurrency exchanges such as Kraken, Gate.io, and Crypto.com. However, the report underscores the limited involvement of “smart money” investors, individuals recognized for their profound understanding of the financial landscape.

PayPal’s entrance into the stablecoin realm in early August elicited considerable anticipation within the cryptocurrency domain. At the time, there were high hopes that the introduction of this stablecoin would expedite broader cryptocurrency adoption and serve as an entry point for the masses. Despite PayPal’s massive user base exceeding 350 million worldwide, initial indicators suggest that only a minor fraction of these users have embraced or held PYUSD within their personal wallets.

The report’s analysis points towards a potential explanation: “On the surface there’s a lack of demand from crypto users for PYUSD when other alternatives exist (might be due to Paypal targeting a different demographic).”

Decentralized exchanges like Uniswap also exhibit a relatively modest involvement, with pools like PYUSD/wETH and PYUSD/USDC comprising fewer than 50,000 tokens. Scrutiny of the top individual PYUSD holders reflects a moderate level of interest, with the leading non-exchange holder possessing less than $10,000 worth of PYUSD. Notably, this holder entered the market after divesting from three memecoins.

Furthermore, the data showcases that fewer than ten non-contract, non-exchange holders maintain balances exceeding $1,000.

Despite the initial lukewarm response, it’s crucial to acknowledge that PYUSD has only been in circulation for less than three weeks, having been introduced with minimal prior announcement.

PayPal’s stablecoin is pegged to the U.S. dollar and is issued by Paxos Trust Co. It operates on the Ethereum network and boasts full backing by dollar deposits, short-term Treasuries, and comparable cash equivalents. Interestingly, the launch of PYUSD triggered a competitive drive among established cryptocurrency players. This week, Circle, the organization behind the USD Coin (USDC), announced an expansion onto six blockchain networks, extending the stablecoin’s presence to a total of 15 networks, all in an effort to enhance its adoption.

At the time of writing, CoinMarketCap data reveals that USDC maintains a market capitalization of roughly $25 billion, whereas Tether’s USDT claims a market capitalization exceeding $82 billion.

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