World Liberty Financial’s WLFI token experienced a sharp drop of around 12 percent over the past 24 hours, drawing renewed attention to the team behind the project. After the decline, the World Liberty Financial team took to the X platform to address growing criticism, focusing in particular on heated debates regarding recent borrowing transactions on the Dolomite decentralized finance protocol.
Debate over collateral cycles in the protocol
Recent revelations showed that the World Liberty Financial team had used their own governance token as collateral on the Dolomite protocol, borrowing stablecoins against it, and subsequently withdrawing a large portion of assets from the associated liquidity pool. As a result, other users of the pool began facing difficulties when attempting to retrieve their funds, raising questions over the protocol’s integrity.
The company’s management did not deny these transactions, instead describing them as part of a deliberate and constructive strategy. One advisor to the Dolomite protocol is known to also advise the WLFI project, further fueling concerns. In particular, the administration’s move to pledge additional WLFI tokens as new collateral was seen as exacerbating doubts rather than reassuring community members about the health of the system.
Observers pointed out that this circular collateralization within the protocol exposed investors to a range of risks, since the WLFI token became central to multiple, interconnected transactions. Meanwhile, company officials have defended their borrowing activities as measures that ultimately generate returns for other participants in the ecosystem.
Developments in price and supply
According to World Liberty Financial, the team has repurchased a total of 435.3 million WLFI tokens over the past six months at an average price of $0.1507 per token, representing an outlay of $65.58 million. They also announced plans to soon propose a governance vote on unlocking tokens belonging to early participants in the project.
Despite these buybacks, the market price of WLFI currently sits about 48 percent below the average repurchase level. This indicates that the company’s treasury has suffered substantial paper losses on these purchases. The recent plunge has pushed token values to their lowest levels since WLFI’s launch in 2025, intensifying concerns among both investors and observers.
In addition, company records show that on April 2 and April 7, three billion WLFI tokens were transferred from the treasury wallet to an intermediate address. The current value of these holdings has slipped to approximately $234 million, compared to $266 million just a week earlier, reflecting the rapid erosion of the token’s market capitalization.
Should these three billion tokens eventually be pledged as collateral in the Dolomite protocol, borrowing potential at prevailing prices would be greatly constrained. With the liquidity pool already nearly depleted, further collateralization and borrowing could make it even harder for existing users to withdraw their funds, worsening liquidity issues.
The World Liberty Financial team said, “Despite ongoing market volatility, we remain confident that our strategic borrowing decisions are sound and continue to generate yield for other users within the system.”
