US investment bank Compass Point has warned about WLFI’s stock market listing.
US President Donald Trump has become one of the most important names in the cryptocurrency industry with his moves.
Trump, who plays an active role in the cryptocurrency industry, attracts attention with his own crypto project as well as investing in many altcoins.
At this point, Trump and his family’s DeFi project, World Liberty Financial (WLFI), is attracting great interest in the market and is preparing for an exchange listing.
But a US bank warned that retail investors could be harmed by the Trump-backed WLFI’s stock market listing.
US investment bank Compass Point said potential pitfalls await investors when the WLFI launches in a few days.
Compass Point analysts highlighted the supply shortage. Accordingly, while WLFI is expected to be listed on several exchanges soon, only a portion of its supply will be traded, with the rest remaining locked up.
Analysts said this would create a low liquidity situation with a high fully diluted valuation (FDV).
Only a portion of WLFI’s total supply will be tradable on Memorial Day, while other tokens will remain locked. This could make the token’s value appear exorbitant on paper, as more than 20% of its supply is owned by US President Donald Trump’s family, according to Compass analysts.
At this point, the bank warned that retail investors could suffer huge losses if exchanges like Coinbase list WLFI with an excessively high FDV.
Only a small portion of the WLFI supply will become tradable. The majority of tokens will remain locked and held by insiders, including the Trump family, who reportedly control over 20% of the supply.
This limited circulating supply, combined with a high FDV that reflects the total value of a token if the entire supply were in circulation, raises red flags.
If exchanges like Coinbase list and price the token too aggressively based on overvaluation, individual investors may find themselves investing in an overpriced asset with little room for profit.”
Compass Point recently reminded that many individual investors lost money for similar reasons during the listing of Official Trump (TRUMP), Trump’s self-named memecoin, in January.
