Trump-backed World Liberty says "we are nowhere near liquidation" as token slips to all-time low
The team borrowed stablecoins by leveraging $5 billion worth of WLFI as collateral, igniting skepticism among those in crypto whether World Liberty would repay its debt.
WLFI, the token that aims to provide holders governance rights of the President Trump-backed World Liberty Financial, dropped to an all-time low on Friday.
The price action comes after the World Liberty team borrowed $75 million in USDC by using $5 billion worth of WLFI as collateral on crypto lending protocol Dolomite, exposing the latter to potential bad debt, CoinDesk reports.
“By being the anchor borrower, we’re generating the yield that makes WLFI Markets compelling for everyone else,” World Liberty Financial posted on X Thursday night. “We are nowhere near liquidation — and frankly, even if markets moved dramatically against us, we’d simply supply more collateral. That’s not a risk,” the team said.
However, the assurance to supply additional WLFI as collateral has not eased concerns among some in the crypto ecosystem, who have expressed skepticism World Liberty will repay its stablecoin debt. On-chain data shows that World Liberty has already sent over $40 million to Coinbase Prime.
Corey Chaplan, Dolomite cofounder and adviser to World Liberty Financial, did not respond to Sherwood News’ request for comment by publication.
Out of Dolomite’s total supply liquidity of $794 million, more than 74% stems from World Liberty’s governance token, WLFI, and its stablecoin, USD1, the platform’s web interface shows.
“WLFI trades with limited market depth relative to the size of the position. If the token moves sharply lower and Dolomite’s liquidation mechanism triggers, the forced sale would crash the price before the collateral could be unwound, leaving the protocol holding bad debt,” CoinDesk reported.
The World Liberty team also announced an upcoming governance proposal to unlock tokens. “The vote will be on a long-term vesting and unlock schedule for retail early purchasers — a structured, phased approach designed with the long-term health of the ecosystem in mind,” the World Liberty team said on X.
Unlocks, the gradual process of releasing previously restricted tokens into circulation to prevent early selling, can introduce volatility to the market for a given token. The price of WLFI has decreased over 14% in the last 24 hours to trade at $0.08, its lowest point since its inception last year, per CoinGecko.
