World Liberty’s USD1 stablecoin sheds $400M in market cap in two weeks

World Liberty Financial’s $USD1 stablecoin has shed over $400 million in market capitalization over the past two weeks, driven by large redemptions on Ethereum and $BNB Chain.

On Monday, CoinGecko data showed $USD1’s market capitalization at about $4.02 billion, down from $4.43 billion on Oct. 6. That’s a decline of approximately $401 million, or 9.1%. World Liberty Financial’s proof-of-reserves dashboard separately showed approximately $4.01 billion in reserves.

The decline extends a period of concentrated redemptions on Ethereum and $BNB Chain, according to blockchain research firm Onchain Benchmark. The researchers found that nearly $200 million in $BNB Chain redemptions originated from a single unidentified address, although they could not establish who controlled the funds or why they were redeemed.

Despite the redemptions, $USD1 maintained its dollar peg throughout the period examined by Onchain Benchmark, trading between $0.998 and $1.000. The researchers found no evidence of a sustained depegging event, indicating that the decline in circulating supply was not accompanied by a significant loss of the token’s dollar value.

$USD1 supply decline outpaces major stablecoins on Ethereum

According to Onchain Benchmark, Ethereum accounted for $184.60 million in net $USD1 redemptions across 63 token burns between Oct. 6 and Oct. 15. $BNB Chain recorded $200.43 million across 12 burns.

On Ethereum, more than 99% of tokens sent for redemption passed through a wallet labeled BitGo, $USD1’s current issuer and custodian, while the $BNB Chain transfers from the unidentified address were made in batches of $30 million to $50 million.

The reductions were not offset by new issuance on Solana, where $USD1 supply remained unchanged at about $1.42 billion during the nine days reviewed by Onchain Benchmark.

“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,” Onchain Benchmark said. “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.”

Transfers between Ethereum and $BNB Chain totaled less than $1 million, according to the report, suggesting the missing supply wasn’t simply shifted between those networks.

$USD1’s supply contraction on Ethereum was steeper than that of several other US dollar-denominated stablecoins between Oct. 6 and Oct. 15. $USD1 supply on the network fell 11.45%, compared with declines of 4.93% for USDe, 2.18% for USDC and 0.76% for circulating USDT.