World Liberty Financial’s USD1 stablecoin has lost more than $400 million in market capitalization over roughly two weeks, as sizeable redemptions reduced circulating supply on Ethereum and BNB Chain. CoinGecko data cited in the source showed USD1 at about $4.02 billion on Monday, down from $4.43 billion on Oct. 6, a drop of around 9.1%.

The decline did not coincide with a break of the token’s dollar peg. Research from Onchain Benchmark said USD1 continued to trade between $0.998 and $1.000 during the period it reviewed, while World Liberty Financial’s proof-of-reserves dashboard showed about $4.01 billion in reserves.

Large burns on two major networks

Onchain Benchmark said the contraction was driven by concentrated redemptions on Ethereum and BNB Chain. Between Oct. 6 and Oct. 15, Ethereum recorded $184.60 million in net USD1 redemptions across 63 token burns, while BNB Chain saw $200.43 million across 12 burns.

The research firm added that transfers between Ethereum and BNB Chain totaled less than $1 million over the same period. That suggests the missing supply was not simply moved from one chain to the other, but was instead removed from circulation through redemption activity.

Single address tied to much of BNB Chain activity

A notable share of the BNB Chain outflows came from one unidentified address, which Onchain Benchmark said accounted for nearly $200 million in redemptions. Those transfers were reportedly sent in batches of $30 million to $50 million.

The researchers said they could not determine who controlled that address or why the funds were redeemed. On Ethereum, meanwhile, more than 99% of the tokens sent for redemption passed through a wallet labeled BitGo, which the report identified as USD1’s current issuer and custodian.

Supply fell faster than other stablecoins on Ethereum

According to the report, USD1’s decline on Ethereum was steeper than that of several other major dollar-linked tokens over the same Oct. 6 to Oct. 15 window. USD1 supply on Ethereum fell 11.45%, compared with declines of 4.93% for USDe, 2.18% for USDC and 0.76% for circulating USDT.

At the same time, the reductions on Ethereum and BNB Chain were not offset elsewhere. Onchain Benchmark said USD1 supply on Solana remained unchanged at about $1.42 billion during the nine days it examined, meaning fresh issuance on that network did not replace the redeemed tokens.

What the next data may show

Despite the drop in outstanding supply, Onchain Benchmark said it found no evidence of a sustained depegging event. In its view, the key issue now is whether future minting restores USD1’s size or whether October’s lower level becomes the starting point for the token under its next operational setup.

The firm said the next test will come with a planned issuer change. It noted that when World Liberty’s trust company opens, it is expected to take over a token whose scale currently appears heavily influenced by a small number of large holders. Onchain Benchmark also said the charter behind that setup is being argued in court, making the next few weeks of supply data the next confirmed signal to watch.

Source: cointelegraph.com