WLFI drops to record low after token-backed loan draws scrutiny

WLFI fell to a new all-time low on Saturday after on-chain data showed wallets linked to World Liberty Financial used large token holdings to borrow stablecoins, raising fresh questions about market risk and liquidation exposure.

Token drop and market context

WLFI traded at about $0.077, its lowest level on record, before moving near $0.079. The token is down 76% from its September peak of $0.33, according to CoinGecko data.

On-chain activity: collateral and borrowing

Reports said wallets tied to World Liberty Financial deposited about 5 billion WLFI tokens on Dolomite. The deposited position was then used to borrow $75 million in USD1 and USDC. Arkham data indicated that more than $40 million of the borrowed funds later moved to Coinbase Prime, drawing additional attention to the project’s financing activity and the scale of its exposure.

Cause of concern: liquidity and liquidation risk

The market reaction was described as swift because WLFI is not widely viewed as a deeply liquid asset. Analysts and DeFi users said a large collateral position tied to price swings could increase pressure if the token declines further.

One DeFi user wrote:

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

Another user compared the structure to borrowing cash against self-created value:

“It’s the financial equivalent of printing casino chips, borrowing cash against them, and telling everyone else not to panic because the house still believes in the chips.”

Dolomite’s role in the lending setup

Dolomite was also cited as a smaller player in DeFi lending. DefiLlama ranks it 19th among lending platforms by total value locked, which added focus on the size of the WLFI-linked position relative to the platform’s broader market footprint.

World Liberty’s response

World Liberty Financial said its positions remain well above liquidation thresholds. The project described itself as an “anchor borrower” and framed the move as a strategy to generate yield.

In its statement, the team said:

“Everyday users are earning outsized stablecoin yields 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 introduce a governance proposal for early retail holders, which would replace immediate token access with a phased vesting schedule, subject to a community vote.

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