PYUSD vs Tether
Currently, there's a prevailing notion that PayPal's USD stablecoin might surpass Tether in prominence. To assess this, let's delve into the details and ascertain if Tether will retain its top spot among crypto's stablecoins.
Interestingly, Tether boasts a considerable edge in customer funds, holding more than double the amount compared to PayPal. With a market capitalization of $82 billion, Tether outpaces PayPal's $39 billion customer fund holdings.
Looking at recent financial performance, Tether reported a noteworthy profit of $1.48 billion in the first quarter of 2023. This is partly attributed to Tether's investment strategy, which involves relatively higher-risk assets like Bitcoin, Gold, and loans, serving as backing for the stablecoin. PayPal on the other hand achieved a first-quarter revenue of $7 billion, generating a net income of $795 million. Meaning that Tethers profits are almost twice that of PayPal's.
However where I believe PayPal has the clear upper hand on Tether is firstly in its vast user base of 433 million active users, whereas Tether currently only has around 42 million wallets (including 27 million on the Tron blockchain) giving PayPal a massive edge here in its reach.
Secondly the biggest competitive advantage I believe PayPal will have is in respect to fiat connectivity. The on/off ramping process is one of the major obstacles for on-chain payments and as a hugely renowned, worldwide established payment company PayPal can offer cheap, effective and fully compliant ways to bridge the fiat and crypto worlds together.
Overall in the initial stages of PYUSD’s introduction as they are just starting out to only U.S. customers, I see it as very unlikely that PSYUSD will significantly impact Tether's market dominance, in the short term anyway. Currently Tether/USDT holds the lion's share at 66.91% of the stablecoin market, followed by USDC from Circle at 20.80%. The remaining stablecoins collectively account for about 12.29% as seen from the chart below.
However, this scenario will likely change as PayPal begins to roll out its new stablecoin on a global scale. This global expansion could gradually erode some of Tether's market share, but I do believe Tether will likely maintain a strong overall position in the stablecoin market due to its already established presence and the foothold it already has with many trading pairs. Show Less
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