WLFI drops to record low after token-backed loans come under scrutiny

WLFI (WLFI) fell sharply on Saturday after onchain data showed wallets linked to World Liberty Financial used major tokens to hold stablecoins.

The move has added pressure on the Trump-linked project as traders weigh the risks associated with using their token as collateral.

WLFI fell to around $0.077, its lowest level in history, before trading near $0.079. The token is now down 76% from $0.33 reached in September, based on CoinGecko data.

The decline followed reports that wallets tied to World Liberty Financial had invested about 5 billion WLFI tokens in Dolomite. The same position was then used to borrow $75 million in USD1 and USDC.

Arkham data showed that more than 40 million loans later moved to Coinbase Prime. That transfer drew more attention to the project’s financing function and the magnitude of its exposure.

The market reaction was quick because WLFI is not viewed as a deeply liquid asset. A large security position tied to price changes can increase pressure if the token falls further.

DeFi users on X say this structure could create a risk for lenders if WLFI approaches closure levels. Others point to the token’s fully diluted value and limited trading depth as a weak point.

“WLFI has a FDV of almost $10 billion, but it’s not an extremely liquid asset,” one user wrote. “So imagine what would happen if 5% of WLFI’s total assets would suddenly need to be sold to liquidate this position.”

Another user compared setting up to self-financing. User said,

“It’s the financial equivalent of printing casino chips, lending money, and telling everyone not to panic because the house still believes in chips.”

Dolomite remains a small player in DeFi lending. DefiLlama ranks 19th among lending platforms in terms of total locked-in value, which added further focus to the size of the position linked by WLFI.

World Liberty defends strategy

World Liberty Financial responded on social media saying that its positions are still well above the liquidation threshold. The project described itself as an “anchor lender” and said the strategy supports crop production.

The group wrote that,

“Everyday users are getting a huge stablecoin yield right now – at a time when traditional markets are offering very little.” It added, “That’s the whole point.”

The project also said it plans to present a governance proposal for shopkeepers early. The proposal would replace the immediate access to tokens with a phased purchase schedule, subject to a public vote.