World Liberty Financial’s flagship USD1 stablecoin has experienced a notable contraction in its circulating supply, shedding over $400 million in market capitalization over a two-week period. The downward pressure has been primarily driven by large-scale token redemptions executed across both the Ethereum and BNB Chain networks, raising questions about short-term liquidity shifts and larger structural transitions facing the digital asset.
According to market data from CoinGecko, the total market capitalization of USD1 stood at approximately $4.02 billion on Monday, marking a sharp decline from $4.43 billion recorded just two weeks prior on Oct. 6. This represents a reduction of approximately $401 million, or 9.1%, in total value. Concurrently, World Liberty Financial’s official proof-of-reserves dashboard reported approximately $4.01 billion in underlying reserves, aligning closely with the circulating supply metrics provided by third-party tracking platforms.
The sudden drop extends a distinct period of concentrated redemptions centered predominantly on Ethereum and the BNB Chain, as detailed in a recent report by blockchain research firm Onchain Benchmark. Notably, the research platform uncovered that nearly $200 million worth of redemptions on the BNB Chain originated from a single, unidentified wallet address. Despite extensive onchain tracking and data analysis, researchers were unable to establish the identity of the entity controlling those funds or the exact underlying motivations prompting such a massive withdrawal of capital.
Despite the substantial volume of tokens being burned and removed from circulation, USD1 successfully maintained its vital $1.00 dollar peg throughout the entire examination period evaluated by Onchain Benchmark. Historical trading ranges showed the stablecoin fluctuating narrowly between $0.998 and $1.000. Researchers found no empirical evidence of a sustained depegging event, which indicates that the substantial decrease in circulating supply occurred in an orderly fashion without causing a severe or prolonged loss of the token’s nominal dollar value on secondary markets.
USD1 Supply Decline Outpaces Major Stablecoins on Ethereum
A closer look at the transactional data provided by Onchain Benchmark reveals how the capital outflows were distributed across different blockchain networks between Oct. 6 and Oct. 15. During this nine-day window, the Ethereum network accounted for $184.60 million in net USD1 redemptions, spread across 63 distinct token burn transactions. Meanwhile, the BNB Chain recorded an even higher outflow, totaling $200.43 million across 12 separate burns.
On the Ethereum network, over 99% of the tokens submitted for redemption passed directly through a wallet address labeled as BitGo, which currently serves as USD1’s designated issuer and custodian. In contrast, the high-value transfers observed on the BNB Chain originating from the unidentified whale address were executed in massive, structured batches ranging between $30 million and $50 million each.
Crucially, these contractions were not offset by any new token issuance on other prominent ecosystems, such as Solana. Data indicates that the USD1 supply on Solana remained entirely unchanged at approximately $1.42 billion throughout the duration reviewed by Onchain Benchmark.
Furthermore, cross-chain bridge data shows that direct transfers of USD1 between Ethereum and the BNB Chain totaled less than $1 million during the observed timeframe. This small figure strongly suggests that the missing supply was not merely repositioned or bridged from one network to another, but rather permanently redeemed and removed from active circulation.
When comparing USD1’s performance to other prominent United States dollar-denominated stablecoins operating on the Ethereum network, the contraction was notably steeper. Between Oct. 6 and Oct. 15, the circulating supply of USD1 on Ethereum fell by 11.45%. This outpaced the declines seen in competing assets over the same period, where USDe dropped by 4.93%, USDC fell by 2.18%, and USDT saw a minor contraction of just 0.76%.
Market observers and researchers suggest that the coming weeks will prove critical as the project navigates upcoming operational changes. Analysts point out that the stablecoin is approaching a major transition regarding its operational framework and regulatory positioning.
As Onchain Benchmark highlighted in its evaluation, the next major test for the asset arrives with the change of its primary issuer. When World Liberty Financial’s newly established trust company officially opens its doors, it will assume operational control over a multi-billion-dollar token whose total supply is heavily influenced by the decisions of a concentrated group of large holders. This shift takes place even as the broader legal and regulatory footing of the initiative continues to be debated.
Whether fresh token mints on Solana or other networks will eventually rebuild the total circulating supply, or whether October simply marks a permanent recalibration of the asset’s overall market footprint heading into its new issuer arrangement, remains the central question that upcoming supply metrics will seek to answer.
