Rapid swings in value have been common in cryptocurrencies, but the recent actions related to the Trump-backed World Liberty Financial (WLFI) token are attracting attention from all parts of the cryptocurrency world. WLFI has plunged 12% in the last 24 hours and has hit its lowest price point since its famous debut in 2025. This major decline in value is not due to overall economic conditions, but rather is due to the project defending its extreme lending procedures in very public ways; retail investors are extremely uneasy about their investment in WLFI.
A Questionable Financial Loop
At the absolute center of this ongoing controversy is a decentralized finance platform known as Dolomite. Financial reports recently surfaced revealing that the WLFI treasury essentially used its own governance token as collateral to borrow massive amounts of stablecoins. In doing so, the project effectively drained Dolomite’s USD1 lending pool. The immediate consequence of this action was severe: everyday depositors suddenly found themselves entirely unable to withdraw their own funds. Instead of addressing the locked funds directly, the development team’s response only poured fuel on the fire.
The Anchor Borrower Defense
Taking to the social media platform X, the team behind World Liberty Financial attempted to calm the growing storm. They confirmed the large amount of trades, but described themselves as an anchor borrower, which they felt was a positive step. They stated that the large amounts they were borrowing created good yields for other participants on the network. They firmly stated they were nowhere near being liquidated by the market.
The Flaw in the Collateral Plan
However, it was their backup plan that truly spooked the market. The project assured anxious investors that if market prices dropped dramatically, they would “simply supply more collateral” to prevent a forced liquidation. To industry critics and financial analysts, this is a massive red flag. Adding more of your own newly minted token to back a loan denominated in that very same ecosystem creates a dangerous circular risk loop. As the price of WLFI continues to fall, the borrowing power of each individual token shrinks, forcing the treasury to lock up even more tokens just to keep the entire loan afloat.
Treasury Buybacks Sink Deep Underwater
The intense financial strain is already starting to show clearly on the project’s balance sheet. The team recently disclosed that they had spent over sixty-five million dollars executing open-market buybacks over the past six months. They scooped up hundreds of millions of WLFI tokens at an average price of roughly fifteen cents. Unfortunately, the recent market crash means the token is now trading nearly fifty percent below that average purchase price. The treasury’s own investments are now significantly underwater, adding another heavy layer of anxiety for retail holders.
Looming Risks and Future Unlocks
The downward pressure is mounting from multiple directions at once. Blockchain data reveals that an additional three billion WLFI tokens were recently moved to an intermediary wallet in early April. Just a week ago, that massive stash was valued at two hundred and sixty-six million dollars; today, it is worth considerably less. If the treasury decides to pump these extra tokens into the Dolomite protocol to defend their loan, it could make the withdrawal situation even worse for average users. With the team also planning to announce a governance proposal next week to unlock tokens for early investors, the market is bracing for even more turbulence ahead.
