USD1 Peg Wobbled in Alleged Attack, Proving Nothing is Too Big to Fail in Crypto

Key Insights:

• USD1 peg slipped to a 24-hour low of $0.9946 on February 23 before recovering toward $1 in what WLFI described as a coordinated attack.
• WLFI alleged hackers compromised cofounder accounts, paid influencers to spread fear, and opened massive shorts to profit from manufactured chaos.
• The brief deviation underscored that political connections and reserve backing cannot eliminate stablecoin vulnerability to market microstructure and information attacks.

USD1 peg experienced a brief but visible departure from its dollar parity on February 23. DEX Screener showed a 24-hour low of $0.9946 and a high of $0.9997 as the stablecoin wobbled before recovering.

World Liberty Financial issued a statement describing the episode as a coordinated attack involving compromised cofounder accounts, paid influencers spreading fear, and massive short positions in WLFI tokens designed to profit from manufactured volatility.

The USD1 peg deviation remained modest in percentage terms, representing roughly a 0.54% dip from the intended $1 target.

A Brief USD1 Peg Loss Before Rapid Recovery on Uniswap

The incident carried outsized significance. It involved a stablecoin explicitly tied to Trump. The token is marketed as fully backed by U.S. dollars. It is also backed by U.S. government money market funds. WLFI’s response emphasized USD1’s mint-and-redeem mechanism and 1:1 backing as stabilizing factors. It argued that the peg held steady despite attempts to manipulate it.

DEX Screener data for USD1/USDT on Ethereum’s Uniswap v3 pool showed USD1 trading around $0.9985 as of February 23. It was consistent with a quick normalization toward $1 but not yet a perfect restoration of the USD1 peg.

USD1 Peg Loss and Recovery | Source: DEX Screener

The rapid recovery aligns with how reserve-backed stablecoins typically behave during mild stress episodes. In that, secondary-market prices wobble temporarily while primary-market arbitrage mechanisms compress deviations back toward the intended peg.

Political Backing Failed to Shield the USD1 Peg from Market Dynamics

World Liberty Financial’s political connections created a complex backdrop for the USD1 peg stability test. Reuters described the venture as backed by the Trump family. It also identified USD1 as the project’s main product.

World Liberty Financial’s political connections created a complex backdrop for the USD1 peg stability test. Reuters described the venture as backed by the Trump family and identified USD1 as its main product. At the same time, Reuters reported that Senate Democrats urged Treasury Secretary Scott Bessent to consider a CFIUS probe into a reported UAE stake in the firm.

The heightened political scrutiny created an elevated “headline beta,” in which information shocks could translate into momentary price dislocations regardless of the reserve design. Some lawmakers described USD1 as President Donald Trump-family linked amid conflict-of-interest concerns.

Unverified Attack Claims Highlight Broader Stablecoin Risks

WLFI’s allegations of coordinated attack tactics, such as hacked accounts, paid fear campaigns, and leveraged short positions, remained unverified in independent public records.

However, the claims reflected a growing recognition that stablecoin attack surfaces extended beyond reserve adequacy to encompass market microstructure, information integrity, and liquidity concentration.

World Liberty’s own risk disclosures issued a warning. They said software defects could cause losses. They also cited vulnerabilities and cyberattacks as potential risks. These threats could result in the loss of USD1 or other assets. The firm acknowledged that standard crypto security risks remain. It added that political affiliation cannot eliminate those risks.

A November 2025 security incident roundup covered developments at World Liberty Financial. It reported that the firm reallocated user funds. The move followed a compromised wallet incident. The report also cited a phishing attack. In response, the company tightened its KYC procedures. This highlighted that high-profile branding did not eliminate standard crypto attack surfaces.

Distribution Concentration Amplified USD1 Peg Vulnerability

USD1’s market structure magnified its sensitivity to confidence shocks. According to Arkham, Binance held roughly 93% of USD1 in circulation, representing approximately $4.5 billion of the roughly $5 billion in circulation.

The extreme venue concentration on Binance provided strong liquidity support but simultaneously created a single-platform dependency, where narrative shocks could trigger outsized price impacts.

Binance Holding Nearly $4.5 Billion USD1 Supply | Source: Arkham

BitGo published USD1 reserve attestations and posted third-party examination reports, including a Crowe LLP examination that describes USD1 as issued and redeemed by BitGo, with branding controlled by World Liberty Financial entities.

WLFI’s product marketing claimed USD1 remained redeemable 1:1 for US dollars with backing consisting of dollars and US government money market funds, supported by monthly attestation reporting.

The gap between reserve integrity and market price highlighted a fundamental truth: the USD1 peg represented a maintained outcome rather than a guaranteed state, requiring continuous arbitrage activity, functional redemption rails, and sustained market confidence.

Even fully backed stablecoins could experience short-lived dislocations when order books thinned, or attention shocks hit marginal buyers faster than arbitrageurs could respond.

The February 23 episode demonstrated that “too big to fail” assumptions imported from traditional finance did not apply cleanly to crypto infrastructure, even when projects carried political connections and substantial scale.

USD1 Peg Wobble Shows Stablecoin Stability isn’t Guaranteed

The brief deviation from the USD1 peg and subsequent recovery illustrated that stablecoins remained vulnerable to account compromise, narrative amplification, and liquidity stress, with reserve backing and political affiliation providing necessary but insufficient protection.

For Bitcoin and the broader crypto ecosystem, the incident reinforced the idea that stablecoin stability is an operational achievement requiring continuous maintenance rather than a permanent state guaranteed by backing assets.

The system’s resilience depended on arbitrage mechanisms, redemption infrastructure, and sustained confidence, making stablecoin rails a potential volatility amplifier during stress episodes even when underlying reserves remained intact.

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