WLFI Drops to Record Low After Token-Backed Borrowing Raises Risk Concerns
WLFI, the native token of the Donald Trump–backed World Liberty Financial platform, sank to an all-time low on Saturday as crypto users expressed concerns after revelations that the project used a large amount of its own 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 at $0.07879, down by 4.66% over the past day.
The downturn came after it was revealed that wallets linked to World Liberty Financial deployed substantial WLFI holdings as collateral on Dolomite, a decentralized lending platform co-founded by the project’s chief technology officer, Corey Caplan.
Onchain data from Arkham shows that a wallet linked to World Liberty Financial deposited around 5 billion WLFI tokens on Dolomite. The wallet then used the tokens as collateral to borrow $75 million in USD1 and USDC (USDC) stablecoins, later transferring more than $40 million to Coinbase Prime.
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WLFI-backed loan position sparks concerns
The large collateral position has raised concerns among DeFi analysts, who warn it could create risks for lenders on Dolomite if WLFI’s price falls and approaches liquidation levels.
“WLFI has almost a $10 billion FDV, but it is not an extremely liquid asset,” one user wrote on X. “So imagine what would happen if 5% of WLFI’s total supply would suddenly need to be sold to liquidate the position,” he added.
Another X user argued that the setup resembles creating artificial “chips” and borrowing against them. “It’s the financial equivalent of printing casino chips, borrowing cash against them, and telling everyone else not to panic because the house still believes in the chips,” they claimed.
Dolomite has a relatively small footprint in decentralized finance, ranking 19th among lending platforms by total value locked, according to DefiLlama.
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World Liberty defends WLFI lending
World Liberty Financial acknowledged the lending activity on social media, but sought to calm markets, stating that its positions remain well above liquidation thresholds. The project described itself as an “anchor borrower” for WLFI and argued that the strategy helps generate yield.
“Everyday users are earning outsized stablecoin yields right now — at a time when traditional markets are offering very little. That’s the whole point,” the project wrote on X.
On Friday, World Liberty said it will soon introduce a governance proposal to create a phased unlock schedule for WLFI tokens held by early retail buyers, replacing immediate access with a long-term vesting plan subject to community vote.
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