$WLFIthe native token of the Donald Trump-backed World Liberty Financial platform, fell to an all-time low on Saturday as crypto users raised concerns following revelations that the project used a large number of its own tokens to make loans.
The token hit a new low of around $0.07714 on Saturday, down 83% from the peak of $0.46 reached last September, according to data from CoinMarketCap. $WLFI is currently at $0.07879, down 4.66% in the past day.
The downturn came after it became known that wallets linked to World Liberty Financial were being deployed substantially $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 has deposited around 5 billion $WLFI tokens on Dolomite. The wallet then used the tokens as collateral to borrow $75 million in USD1 $USDC ($USDC) stablecoins, which later transferred more than $40 million to Coinbase Prime.
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$WLFI-supported loan position is a cause for concern
The large collateral position has raised concerns among DeFi analysts, who warn that it could pose risks to Dolomite lenders if $WLFI‘s price falls and approaches the liquidation level.
“$WLFI has an FDV of almost $10 billion, but it is not an extremely liquid asset,” wrote one user on X. “Imagine what would happen if 5% of $WLFI‘s total supply would have to be sold suddenly to liquidate the position,” he added.
Another X user argued that the scheme is akin to creating artificial ‘chips’ and borrowing against them. “It’s the financial equivalent of printing casino chips, borrowing cash and telling everyone not to panic because the house still believes in the chips,” they claimed.
Dolomite has a relatively small footprint in decentralized finance and ranks 19th among lending platforms by total value, according to DefiLlama.
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Defending world freedom $WLFI loans
World Liberty Financial acknowledged the lending activity on social media but sought to calm markets, saying its positions remain well above liquidation thresholds. The project described itself as an ‘anchor lender’ for $WLFI and argued that the strategy helps generate returns.
“Daily users are currently earning excessive stablecoin returns – at a time when traditional markets have very little to offer. 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 $WLFI tokens held by early private buyers, replacing immediate access with a long-term acquisition plan subject to community voting.
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