USD1 Stablecoin Loses Over $400 Million in Market Value Within Fortnight
The USD1 stablecoin issued by World Liberty Financial experienced a market capitalization drop exceeding $400 million during a two-week span marked by substantial redemption activity across Ethereum and BNB Chain networks.
The USD1 stablecoin from World Liberty Financial has experienced a market capitalization reduction exceeding $400 million throughout the previous two-week period, primarily attributed to substantial redemption volumes occurring across both Ethereum and BNB Chain blockchains.
Data from CoinGecko on Monday revealed that USD1's total market capitalization stood at roughly $4.02 billion, representing a decrease from the $4.43 billion figure recorded on Oct. 6. This represents an approximate reduction of $401 million, translating to a percentage decline of 9.1%. Separately, the proof-of-reserves dashboard maintained by World Liberty Financial displayed reserves totaling approximately $4.01 billion.
This downturn continues a pattern of focused redemption activity occurring on both Ethereum and BNB Chain networks, as reported by blockchain analytics firm Onchain Benchmark. The research team discovered that close to $200 million worth of BNB Chain redemptions were traced back to a single wallet address that remains unidentified, though researchers were unable to determine the entity controlling these funds or establish the motivation behind the redemptions.
Throughout the timeframe analyzed by Onchain Benchmark, USD1 successfully maintained its peg to the US dollar despite the redemption activity, with trading prices ranging from $0.998 to $1.000. The analysis revealed no indication of a prolonged depegging incident, demonstrating that the reduction in tokens in circulation did not result in any meaningful erosion of the token's dollar-denominated value.
USD1 supply decline outpaces major stablecoins on Ethereum
Data from Onchain Benchmark indicates that the Ethereum network witnessed $184.60 million in net USD1 redemptions spanning 63 separate token burn events occurring between Oct. 6 and Oct. 15. Meanwhile, BNB Chain documented $200.43 million in redemptions distributed across 12 burn transactions.
Within the Ethereum ecosystem, over 99% of the tokens submitted for redemption were routed through a wallet bearing the BitGo label, which currently serves as USD1's issuer and custodial entity, whereas the BNB Chain transactions originating from the mysterious address were executed in increments ranging from $30 million to $50 million per batch.
These supply reductions were not counterbalanced by fresh token issuance on the Solana network, where USD1's circulating supply held steady at approximately $1.42 billion throughout the nine-day window examined in the Onchain Benchmark analysis.
The next tests come with the change of issuer. When World Liberty's trust company opens, it will take on a token whose size depends on the decisions of a few large holders, under a charter whose legal footing is being argued in court. Whether fresh mints on Solana, or anywhere else, rebuild the total, or October marks the size USD1 carries into its new issuer, is the question the next weeks of supply data will answer.
Onchain Benchmark
Cross-chain transfers occurring between the Ethereum and BNB Chain networks amounted to less than $1 million in total, the report stated, indicating that the depleted supply was not merely relocated between these two blockchain ecosystems.
The rate of USD1's supply reduction on Ethereum exceeded that of multiple other stablecoins pegged to the US dollar during the Oct. 6 through Oct. 15 period. Supply of USD1 on the network contracted by 11.45%, while USDe experienced a 4.93% decline, USDC saw a 2.18% decrease, and circulating USDT dropped by 0.76%.