Trump-backed WLFI tumbles $427M after Dolomite loans

World Liberty Financial’s WLFI governance token plunged to new lows on Friday, falling about 14% to trade near $0.08 and erasing roughly $427 million in market value. The token’s market capitalization dropped to about $2.58 billion from nearly $3 billion after the project tapped DeFi protocol Dolomite for approximately $160 million in USDC loans and said it will propose a governance vote to allow some holders to trade locked WLFI.

Market participants flagged elevated utilization in Dolomite’s USD1 lending pool tied to the loans and noted thin WLFI liquidity on the platform. Some observers warned that a forced liquidation of World Liberty’s position could leave the lending pool unable to recover the full value of the stablecoins it lent. Blockchain data showed part of the borrowed USDC was transferred to Coinbase Prime, raising questions about how those funds might be used.

World Liberty pushed back on the criticism, calling the online criticism “FUD” and posting on X that it was not near liquidation and could supply additional collateral if needed. The project wrote that acting as an anchor borrower is generating yield for other users on Dolomite and noted that Dolomite co-founder Corey Caplan serves as a World Liberty advisor.

Blockchain analysis firm Arkham Intelligence showed about $400 million worth of WLFI posted as collateral across two wallets on Dolomite, representing roughly 98% of the token supply on the platform. Token tracking services indicate about 75% of WLFI’s total supply remains locked and non-transferable. World Liberty said it is drafting a governance proposal that would let holders vote on unlocking some tokens; the team clarified any approved plan would include a long-term vesting and unlock schedule rather than making all tokens immediately tradable.

World Liberty previously raised capital through two WLFI sales, reporting about $550 million raised from roughly 85,000 participants. Token tracking data show about 20% of the total supply was allocated via public sales and those allocations are worth about $2 billion on paper. Separately, a recent governance change linking investor access to team members with financial alignment passed with strong support.

Some market participants said World Liberty has not fully explained how it would repay the USDC loans if markets moved against the project. Analysts and users said they will watch any formal governance submission for details on the proposed vesting schedule, safeguards for market liquidity and the project’s plan to service or repay the stablecoin borrowing. World Liberty did not provide further comment immediately.

Background: WLFI launched last year as a non-transferable governance token tied to the World Liberty ecosystem, which also introduced a USD1 stablecoin with a multibillion-dollar supply target nearly a year ago.