Donald Trump-backed crypto project World Liberty Financial saw its native token, WLFI, experience a dramatic crash over the weekend, dropping to an all-time low and fueling concerns about the platform’s financial health.
Collateralized loan triggers heavy selling
The WLFI token’s price plummeted to about $0.077, marking an 83% collapse from its September peak of $0.46. As of the latest trading, WLFI hovered near $0.078, posting a 4.66% decline in the last 24 hours alone.
The sell-off accelerated after wallets associated with World Liberty Financial used large amounts of WLFI tokens as collateral to secure sizeable loans, intensifying downward price pressure.
On-chain data shows a wallet linked to the project deposited roughly 5 billion WLFI tokens into Dolomite, a decentralized lending platform. Using this stash as collateral, the entity borrowed $75 million worth of stablecoins USD1 and USDC.
More than $40 million from the loan proceeds were subsequently transferred to Coinbase Prime, catching the attention of market watchers and raising eyebrows across the crypto industry.
Analysts expressed concern about the implications of this move, especially given WLFI’s limited liquidity. They warned that if prices keep sliding, the risk of forced liquidation of collateral could pose serious problems for lenders.
Liquidity and valuation questions dominate debate
Some market participants highlighted a paradox: despite WLFI’s fully diluted valuation of approximately $10 billion, it remains a largely illiquid asset. This illiquidity raises fears that any potential liquidation could spark even heavier selling pressure and destabilize the token’s price further.
The Dolomite lending protocol itself is seen as a relatively minor player in the decentralized finance ecosystem. Its lower standing in terms of total value locked compared with competitors is viewed as a factor that adds to the overall risk perception.
World Liberty Financial addressed the controversy on social media, confirming the recent loan activities and assuring the public that their positions remain well above the liquidation thresholds.
The platform emphasized that the current strategy is generating high yields and claimed users are earning higher returns via stablecoins than in traditional markets.
In addition, the project announced plans for a new governance proposal related to WLFI tokens. Under this proposal, early investors would see their token access tied to a long-term vesting schedule, instead of immediate availability.
World Liberty Financial explained that this proposed change will be put to a community vote, aiming to make the token economy more sustainable for the long term.
