World Liberty Financial’s WLFI token has dropped 12% to its lowest point since its launch in 2025, following the company’s defense of its lending practices on the Dolomite DeFi platform. The decline comes after CoinDesk reported that WLFI had used its own governance token as collateral to borrow stablecoins, significantly depleting Dolomite’s lending pool.
In a recent thread on social media, WLFI acknowledged its strategy, stating it is an “anchor borrower” that generates yield for other users. The firm claimed it could avoid liquidation by providing additional collateral, a move that has raised concerns among investors about the sustainability of its approach.
“We are one of the largest suppliers and borrowers on WLFI Markets,” WLFI stated. “Yes, we supplied WLFI as collateral and borrowed stablecoins. No, we are nowhere near liquidation, and frankly, even if markets moved dramatically against us, we’d simply supply more collateral.”
Despite this reassurance, critics argue that WLFI’s strategy creates a circular risk loop. As the value of WLFI decreases, its borrowing capacity diminishes, concentrating collateral in a declining asset and complicating withdrawal options for other Dolomite users. WLFI’s treasury buybacks have also become problematic, with the token now trading approximately 48% below the average buyback price of $0.1507.
WLFI has disclosed that it conducted $65.58 million in buybacks over the past six months, acquiring 435.3 million WLFI tokens. However, the current market value of these tokens has dropped significantly, with three billion additional WLFI tokens currently held in an intermediary wallet, valued at around $234 million, down from $266 million just a week prior.
The situation poses a dilemma for WLFI as it attempts to navigate a challenging market environment. Lower token prices reduce borrowing power, and the strategy of depositing more WLFI to secure stablecoins from a nearly drained pool may hinder other depositors’ ability to withdraw their funds.
As the cryptocurrency landscape continues to evolve, the implications of WLFI’s lending strategy will be closely monitored by investors and market participants alike.
World Liberty Financial's WLFI token has seen a significant drop following its defense of a controversial lending strategy on the Dolomite platform. Critics express concerns over the sustainability of WLFI's approach, which may exacerbate risks for investors.
Source: CoinDesk