WLFI Token Price Drops Amid Concerns Over Project's Financial Strategy

WLFI's native token has plummeted to an all-time low, fueling concerns over the project's financial strategy. The cryptocurrency, which peaked at $0.46 in September 2023, is currently trading at around $0.07879, down 83% from its peak.

The downturn can be attributed to revelations that World Liberty Financial, a Donald Trump-backed platform, used a substantial amount of WLFI tokens as collateral on Dolomite, a decentralized lending platform co-founded by the project's chief technology officer, Corey Caplan.

According to onchain data from Arkham, a wallet linked to World Liberty Financial deposited around 5 billion WLFI tokens on Dolomite and used them as collateral to borrow $75 million in USD1 and USDC stablecoins. More than $40 million was subsequently transferred to Coinbase Prime.

The large collateral position has raised alarms among DeFi analysts, who warn it could create risks for lenders on Dolomite if WLFI's price falls and approaches liquidation levels. 'WLFI has almost a $10 billion FDV, but it is not an extremely liquid asset,' one user noted. 'So imagine what would happen if 5% of WLFI's total supply would suddenly need to be sold to liquidate the position.'

World Liberty Financial acknowledged the lending activity on social media, attempting to calm markets by stating that its positions remain well above liquidation thresholds. The project described itself as an 'anchor borrower' for WLFI and argued that the strategy helps generate yield.