WLFI, the native token of Donald Trump-backed World Liberty Financial platform, fell to an all-time low on Saturday as cryptocurrency users expressed concerns after it was revealed that the project was using a large amount of its tokens to take out loans.
The token hit a new low of around $0.07714 on Saturday, down 83% from its peak of $0.46 reached last September, according to data from CoinMarketCap. WLFI is currently trading at $0.07879, down 4.66% over the past day.
The downturn came after it was revealed that wallets linked to World Liberty Financial posted large holdings of WLFI as collateral on Dolomite, a decentralized lending platform co-founded by the project’s chief technology officer, Corey Kaplan.
Onchain data from Arkham shows that a wallet linked to World Liberty Financial has deposited around 5 billion WLFI tokens on Dolomite. The wallet then used the tokens as collateral to borrow $75 million in stablecoins USD1 and USDC, and later transferred over $40 million to Coinbase Prime.
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The WLFI-backed loan position raises concerns
The large collateral position has raised concerns among DeFi analysts, who warn that it could create risks for lenders on dolomite if the price of WLFI declines and approaches liquidation levels.
“WLFI has roughly $10 billion in FDV, but it’s not a very liquid asset,” one user wrote on X. “So imagine what would happen if there was suddenly a need to sell 5% of WLFI’s total supply to liquidate the position,” he added.
Another X user argued that the setup is like creating artificial “chips” and borrowing against them. “This is the financial equivalent of printing casino chips, borrowing money for them, and telling everyone not to panic because the company still believes in the chips,” they claimed.
Dolomite has a relatively small footprint in DeFi, ranking 19th among lending platforms in terms of total value locked, according to DefiLlama.
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World Liberty advocates for WLFI lending
World Liberty Financial acknowledged the lending activity on social media, but sought to calm markets, noting that its positions remained well above liquidation thresholds. The venture described itself as WLFI’s “major borrower” and argued that the strategy helps generate return.
“Daily users are earning significant returns from stablecoins right now – at a time when traditional markets offer very little. That’s the point,” the project wrote on the X website.
On Friday, World Liberty said it would soon submit a governance proposal to create a phased unlock schedule for WLFI tokens held by early retail buyers, replacing instant access with a longer-term entitlement plan subject to a community vote.
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