USD1 Stablecoin Drops Over $400M Amid Large Redemptions on Ethereum and BNB Chain

As reported by CoinGecko on Monday, USD1’s market capitalization stood at approximately $4.02 billion, down from $4.43 billion on October 6th. This represents a reduction of roughly $401 million, or 9.1%. Separately, World Liberty Financial’s reserve verification dashboard indicated reserves of about $4.01 billion.

This downward trend continued amid concentrated redemptions on Ethereum and BNB Chain, according to blockchain analytics firm Onchain Benchmark. Their investigation revealed nearly $200 million worth of redemptions on BNB Chain originating from a single unidentified address, although the controller and motivation behind these redemptions remain unknown.

Despite ongoing redemptions, USD1 maintained its dollar peg throughout the period analyzed by Onchain Benchmark, trading consistently between $0.998 and $1.00. The researchers found no evidence of sustained price deviations, suggesting the drop in circulating supply was not linked with a major loss in USD value of the token.

Between October 6th and 15th, Onchain Benchmark observed net redemptions totaling $184.6 million on Ethereum across 63 token burns. On the BNB Chain, 12 burns accounted for redemptions of $200.43 million.

More than 99% of the tokens redeemed on Ethereum passed through a wallet labeled BitGo, the current issuer and custodian of USD1. Meanwhile, the BNB Chain redemptions from the unidentified address were executed in transfers ranging from $30 million to $50 million each.

New USD1 token issuance on Solana did not offset these reductions; supply on Solana remained steady at roughly $1.42 billion during the nine days studied by Onchain Benchmark.

Onchain Benchmark commented, “The upcoming challenges relate to the issuer transition. When World Liberty’s trust company is established, it will assume control over a token whose volume depends on decisions by several major holders, governed by a charter currently under legal dispute in court. Whether fresh minting on Solana or elsewhere restores total supply, or October’s levels represent the volume transferring to the new issuer, will become evident through upcoming supply data.”

The report also noted that transfers between Ethereum and BNB Chain totaled less than $1 million, implying that the reduced volume was not simply shifted between these two networks.

Compared with other major US dollar-pegged stablecoins on Ethereum, USD1’s supply contraction was notably sharper between October 6th and 15th. The market saw an 11.45% drop in USD1’s supply on Ethereum, while USDe declined by 4.93%, USDC by 2.18%, and circulating USDT by only 0.76%.

The significance of this development lies in the token's supply dynamics and issuer transition, which may influence USD1’s future market presence and stability.

This reduction and subsequent token management period will be critical in determining USD1’s role and stability across multiple blockchain networks moving forward.