- PayPal launched a new Ethereum stablecoin on Monday.
- The embattled company is entering a lucrative high-margin business.
- PayPal's stock price has plunged by almost 80% from its all-time high.
PayPal stock price drifted upwards on Monday as the embattled fintech company entered the stablecoin industry. The shares jumped by more than 1% as the main indices like the Dow Jones and the Nasdaq 100 jumped by more than 0.50%.
PayPal to launch a stablecoin
PayPal is entering deep into the crypto industry by launching a new stablecoin that will compete with the likes of Tether, Dai, and USD Coin. In a statement, the company said that PayPal USD (PYUSD) will be issued on Ethereum’s network.
PayPal becomes the first major company to launch a stablecoin. USD Coin was launched by Circle while Tether was issued by Bitfinex. Initially, the stablecoin will be offered in the United States before rolling out internationally.
PayPal users who buy PYUSD will be able to send USD between PayPal and other wallets. Also, they will be able to send the stablecoin to other people, fund their purchases, and convert any currency to PYUSD. In a statement, the company’s CEO said:
"Our commitment to responsible innovation and compliance, and our track record delivering new experiences to our customers, provides the foundation necessary to contribute to the growth of digital payments through PayPal USD."
Launching a stablecoin is a simple and innovative way for PayPal to grow its business. Stablecoin issuers make money in a very simple way. After receiving deposits, these companies invest the funds in government and corporate bonds.
Read more: How to buy crypto with PayPal.
It is a high-margin business, with companies like Tether having profit margins of over 90%. Tether’s net profit came in at over $1.48 billion in the first quarter. Therefore, if PYUSD gains such a market share, there is a likelihood that it will make milions of dollars in the coming years.
PayPal stock price forecast
The announcement came a few days after PayPal announced extremely weak financial results. In a statement, the company said that its gross margins dropped in the second quarter. Its revenue came in at $7.29 billion, a meager 7% YoY increase while its EPS was $1.16.
PayPal expects that its Q3 revenue will rise by 8%, signaling that the company is no longer a growth story.
Turning to the daily chart, we see that the PYPL stock price has been in a bearish trend for a while. Most recently. It found a strong resistance at $76.81, which coincides with the descending trendline shown in green.
PayPal stock price also dropped below the important support at $68, the lowest level since July last year. It has also moved below the 25-day and 50-day exponential moving averages (EMA).
Therefore, the outlook for the stock is bearish, with the next level to watch being at $59.10. A move above the resistance at $68 will point to more upside to the next point at $76.
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