WLFI, the native token of the Donald Trump-backed World Liberty Financial platform, dropped to a record low on Saturday after concerns emerged over the project’s use of its own tokens as loan collateral.
The token fell to approximately $0.07714, marking an 83% decline from its September peak of $0.46, according to CoinMarketCap data. It was last trading near $0.07879, down 4.66% over the past 24 hours.
The sell-off followed reports that wallets linked to World Liberty Financial had used significant 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 indicates that a wallet linked to World Liberty Financial deposited roughly 5 billion WLFI tokens into Dolomite, using them as collateral to borrow $75 million in USD1 and USDC stablecoins. More than $40 million of those funds were later transferred to Coinbase Prime.
WLFI-backed loan raises concerns
The sizable collateral position has sparked concern among DeFi analysts, who warn it could pose risks to lenders on Dolomite if WLFI’s price declines and nears liquidation thresholds.
“WLFI may have a fully diluted valuation near $10 billion, but it isn’t a highly liquid asset,” one user wrote on X. “Imagine the impact if even 5% of the total supply had to be sold to liquidate the position,” they added.
Another commenter compared the setup to creating artificial liquidity and borrowing against it, likening it to “printing casino chips, taking loans against them, and reassuring everyone that the system is stable as long as confidence holds.”
Dolomite remains a relatively small player in decentralized finance, ranking 19th among lending platforms by total value locked, according to DefiLlama.
World Liberty responds to WLFI lending concerns
World Liberty Financial addressed the lending activity on social media, aiming to reassure users by stating that its positions remain comfortably above liquidation levels. The project described itself as an “anchor borrower” for WLFI, arguing that the strategy is designed to generate yield.
“Everyday users are earning elevated stablecoin yields at a time when traditional markets are offering very little—that’s the whole point,” the team said in a post on X.
On Friday, the project also announced plans to introduce a governance proposal that would implement a phased unlock schedule for WLFI tokens held by early retail investors. The proposal would replace immediate access with a longer-term vesting structure, subject to a community vote.
