What to know : World Liberty Financial's WLFI token fell 12 percent to its lowest level since its 2025 launch, after the Trump-linked crypto venture defended a controversial lending strategy on the Dolomite DeFi platform. The firm acknowledged using its own governance token as collateral to borrow stablecoins and drain Dolomite's USD1 pool, arguing it is an "anchor borrower" that generates yield for others and can avoid liquidation by posting more WLFI. Critics say the plan deepens a circular risk loop, as falling WLFI prices erode borrowing power, concentrate collateral in a sliding token and worsen withdrawal constraints for existing Dolomite depositors, while WLFI's treasury buybacks are now significantly underwater.
World Liberty Financial's WLFI token fell about 12% in the past 24 hours after the Trump-linked crypto venture published a thread on X defending its lending position on Dolomite, the DeFi protocol whose co-founder advises WLFI.
The thread came in response to CoinDesk's reporting that WLFI had deposited its own governance token as collateral, borrowed stablecoins against it, and drained the USD1 lending pool to the point where other depositors could not withdraw.
WLFI did not dispute the transactions but instead argued that the position was intentional and beneficial.
"We are one of the largest suppliers and borrowers on WLFI Markets," the X account posted. "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."
The statement that WLFI would add more of its own token as collateral to avoid liquidation further highlights, rather than resolves, the concern raised in CoinDesk's reporting.
Adding more WLFI to back a position denominated in WLFI on a protocol advised by WLFI's own advisor is a form of circularity that investors may want to keep track of.
WLFI framed its role as "anchor borrower," saying the borrowing generates yield for other users at a time when traditional markets offer little. The team disclosed $65.58 million in open-market buybacks of 435.3 million WLFI tokens at an average price of $0.1507 over the past six months, and said a governance proposal to unlock tokens for early holders would be posted next week.
The token is now trading roughly 48% below the buyback average, meaning WLFI's own treasury purchases are significantly underwater.
WLFI has now hit its lowest level since its 2025 launch.
Meanwhile, three billion additional WLFI tokens sit in an intermediary wallet after the treasury transferred them on April 2 and April 7. That stash is worth roughly $234 million as of current prices, down from $266 million a week ago.
The math works against WLFI on every side if those tokens follow the same path into Dolomite. Lower prices mean less borrowing power per token, and depositing more tokens to borrow more stablecoins from a pool that is already nearly drained makes it harder for other depositors to withdraw. The collateral backing the position becomes even more concentrated in a token that just lost 12% in a day.
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