Taking a token-backed loan increases risk
WLFI, the parent of the Donald Trump-backed global financial freedom platform, fell to record highs on Saturday as crypto users expressed concern after it was revealed that the project was using large amounts of tokens to borrow.
According to data from CoinMarketCap, the token reached a new low of $0.07714 on Saturday, down 83% from its peak of $0.46 last September. WWFI is currently at $0.07879, down 4.66% from the previous day.
The decline comes after it was revealed that wallets linked to World Liberty Finance had deployed WLFI holdings as collateral on Dolomite, a decentralized lending platform founded by Corey Kaplan, the project's chief technology officer.
Onchain data from Arkham shows that a wallet linked to World Liberty Financial has about 5 billion WMFI tokens stored on Dolomite. The wallet used the tokens as collateral and transferred more than $40 million to Coinbase Prime to borrow $75 million in USD1 and USDC (USDC) stablecoins.
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WLFI backed loan placement raises concerns.
The large collateral position has raised concerns among DeFi analysts, who warn that if WLFI's value falls and it approaches liquidity, it could pose a risk to lenders at Dolomite.
“WFI has a FDV of about $10 billion, but it's not an extremely liquid asset,” one user wrote on X. “So imagine what would happen if 5% of WWFI's total supply was suddenly sold to eliminate the position,” he added.
Another X user argued that the setup was like creating artificial “chips” and borrowing against them. “This is the equivalent of a casino printing chips, lending money on them and telling everyone not to panic because the house still believes in chips,” he said.
Dolomite has a relatively small footprint in decentralized finance, ranking 19th among lending platforms by total value, Defilama says.
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World Freedom protects the WMFI loan
World Liberty Financial acknowledged the credit activity on social media, but sought to calm markets by saying its position was higher than its value. The project described itself as an “anchor borrower” for WMFI and argued that the strategy would help produce production.
“Everyday users are now getting a super stable coin – at a time when traditional markets are offering very little. That's the bottom line,” the project said on X.
On Friday, World Liberty said it would soon introduce an administration proposal to create an open-access program for WLFI tokens held by former retail buyers, replacing immediate access with a long-term carry scheme based on community votes.
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