The crypto market is buzzing with concern as WLFI, the native token of the Donald Trump–backed World Liberty Financial platform, plummeted to a record low this Saturday. The sharp decline follows revelations that the project leveraged billions of its own tokens as collateral to secure a $75 million stablecoin loan, sparking fears of a potential liquidity crisis.
According to data from CoinMarketCap, WLFI hit a bottom of approximately $0.07714, marking a staggering 83% drop from its September peak of $0.46. While the token saw a minor correction to $0.07879, it remains down nearly 5% in the last 24 hours and over 65% for the year. This downward spiral intensified after on-chain data from Arkham Intelligence revealed that wallets associated with World Liberty Financial deposited 5 billion WLFI tokens into Dolomite, a decentralized lending platform.
Why the World Liberty Financial Loan is Ringing Alarm Bells
The move to use WLFI as collateral has drawn sharp criticism from decentralized finance (DeFi) analysts. The primary concern lies in the “circular” nature of the loan: the project’s CTO, Corey Caplan, is a co-founder of Dolomite, the very platform where the tokens were deposited. By using 5 billion tokens—roughly 5% of the total supply—to borrow $75 million in USDC and USD1, the project has created a massive liquidation risk.
DeFi experts on social media have been quick to point out the dangers of this strategy. Because WLFI is not a highly liquid asset, a sudden price drop could trigger a forced sale of those 5 billion tokens to cover the loan. Such a “liquidation event” would likely tank the price further, creating a death spiral for investors. Critics have compared the move to “printing casino chips” and borrowing real cash against them, arguing that the value backing the loan is largely artificial.
World Liberty Financial Defends Lending Strategy as Market Panic Spreads
In response to the growing backlash, World Liberty Financial took to social media to reassure the community. The project team described themselves as an “anchor borrower,” claiming that the high-volume borrowing helps generate “outsized stablecoin yields” for everyday users. They maintained that their positions are currently well above liquidation thresholds and that the strategy is a feature, not a bug, of their financial ecosystem.
To further stabilize the ecosystem, the project announced a forthcoming governance proposal aimed at early retail buyers. Instead of providing immediate access to tokens, the proposal suggests a phased unlock schedule and a long-term vesting plan. While this move is intended to prevent a mass sell-off, many investors remain wary of the project’s long-term viability given the recent volatility and the controversial nature of its internal lending practices.
