PayPal stock is rising as the market capitalization of PYUSD nears $1 billion.

PayPal stock has entered a bull market, rising over 25% from its lowest point earlier this month.

Market capitalization of the PayPal USD stablecoin
 

Recent data indicates a significant surge in market capitalization, which has soared past the psychological threshold of $907 million as of August 21. This represents remarkable growth for a stablecoin that began the year with a market cap of $264 million.

Stablecoin issuers, such as PayPal, generate revenue primarily through interest rates and transaction fees. With U.S. interest rates ranging from 5.25% to 5.5%, PayPal stands to earn over $50 million annually in interest income.

Tether, the largest stablecoin with assets exceeding $117 billion, reported a quarterly profit of over $4.5 billion in the first quarter of 2024. The majority of this revenue was derived from interest, with the remainder coming from mark-to-market gains on assets like Bitcoin and gold.

However, PayPal faces challenges in an increasingly competitive stablecoin market. In addition to Tether, Circle's USD Coin (USDC) has gained traction, boasting over $34 billion in assets. Ripple is also in the process of developing its stablecoin, RLUSD, which will be backed 1:1 by the U.S. dollar.

Moreover, Ethena has introduced USDe, which has attracted over $3 billion in assets, while Ondo's OUSD has reached $300 million. These stablecoins are gaining popularity due to their ability to offer monthly returns to holders, with USDY providing a 5.35% annual percentage derived from investments in U.S. Treasuries.

PayPal's shares have skyrocketed

PayPal's stock has surged to its highest point in over a year, elevating its market valuation to more than $71 billion. However, it still lags significantly behind its pandemic peak of $309, when its valuation exceeded $300 billion.

This increase in stock price followed an upgrade from analysts at Daiwa, who moved their rating from neutral to outperform, emphasizing that PayPal is likely to succeed despite fierce competition from major players like Apple, Google, and Affirm.

Additionally, Argus Research raised its rating from buy to hold, while Mizuho, JPMorgan, and Barclays maintained their outperform ratings.

The stock's recovery comes on the heels of PayPal's mixed second-quarter financial results, which showed an 85% increase in revenue to $7.8 billion, even as active accounts declined to 429 million. The company has also been returning cash to shareholders through stock buybacks.

Although it's still early, the stock may continue its upward trajectory as it forms a golden cross chart pattern, a bullish signal that occurs when the 50-day and 200-day Exponential Moving Averages intersect.

Importantly, the stock has surpassed a key resistance level at $70.69, which was the previous high for the year. This recovery is taking place in a high-volume trading environment, with the accumulation/distribution indicator trending upward.