The PayPal stock price rebounded this week, continuing a trend that started late September when it was trading at $65.30. This rebound happened as the company’s stablecoin growth continued and as investors bought the recent dip. 

PayPal USD (PYUSD) stablecoin growth 

One of the top reasons why the PayPal stock price is soaring is that the company is becoming a major player in the stablecoin industry.

Data compiled by Artemis shows that the PYUSD stablecoin supply continues to rise this month. The supply jumped by 113% in the last 30 days to over $2.5 billion.

The surge led to a 150% increase in stablecoin transactions, which jumped to 1.8 million. Also, the adjusted PYUSD transaction volume rose by 7,000% to over $17 billion. This performance makes it one of the fastest-growing players in the stablecoin industry, especially after the recent partnerships with Aptos and Spark.

PayPal aims to benefit from the PYUSD growth in several ways. First, it hopes that the stablecoin will provide it with a high-margin revenue over time.

Stablecoins make money in a way similar to banks. They normally take customer deposits and invests them in government bonds and then take all the interest.

The only difference with banks is that the GENIUS Act has limited them to how they can invest customer deposits. Banks, on the other hand, are usually free to invest the funds in assets that generates substantial returns.

The other difference is that stablecoin companies don’t have to share the interest income with the holders, meaning that they keep all the interest.

How PYUSD will benefit PayPal

PayPal has not shared how much money it is making with its stablecoin. However, assuming that it is investing all the funds in government bonds, which are yielding about 4% today, one can assume that the annual revenue will be about $100 million.

This is a huge amount considering that the margins are almost 100%. The only risk is that the Federal Reserve is cutting interest rates, which will reduce the total revenues.

Still, PayPal’s business will be affected negatively by the stablecoin industry as more users select them for payment. That is because PayPal transactions are often slow and expensive. Some PayPal transactions require a customer to wait for 24 hours before they can use their money.

Also, many companies have always complained about the substantial fees charged by these payment processing firms and many of them are considering for leveraging these stablecoins. For example, PayPal’s Braintree charges shops about 3% for a transaction, meaning that a company pays about $30 for a $1000 purchase. With stablecoins, the fee here is usually less than $1.

Stablecoin growth to offset slowing core business 

The ongoing stablecoin growth will help to offset PayPal’s slowing growth. The most recent results showed that the revenue rose by 5% in the second quarter to $8.3 billion, while the operating margin rose by 14% to $1.5 billion, and the EPS jumped by 20% to $1.29.

This growth happened as the total payment volume rose by 6% to $443 billion. Wall Street analysts expect that PayPal’s business slowdown will continue, with the average estimate for third-quarter revenues being $8.22 billion, up by 4.78% from what it made in the same period last year. 

Analysts also expect that the annual revenue will be $33 billion, up by 4% from what it made last year.

PayPal stock price technical analysis

PYPL stock chart | Source: TradingView

The daily chart shows that the PayPal share price bottomed at $65.30 in September and then bounced back to the current $72 today. This rebound happened after it formed an inverse head and shoulders pattern, which is is one of the most popular bullish reversal patterns.

The stock has moved above the 38.2% Fibonacci Retracement level at $70. It has also jumped above the 50-day and 100-day Exponential Moving Averages (EMA). 

Most importantly, the stock formed a bullish island pattern, which is a common bullish reversal sign. Therefore, the stock will likely continue rising as bulls target the next psychological level at $80

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