WLFI Hits New Low as World Liberty Defends Dolomite Loans

• WLFI hit a new low as World Liberty weighed a token unlock plan for early holders.
• World Liberty defended $150M in Dolomite loans and denied liquidation concerns.
• Arkham showed $400M in WLFI on Dolomite, raising concentration risk concerns.

World Liberty Financial’s governance token fell to a new low on Friday after the Trump-backed crypto project said it was preparing a proposal to unlock WLFI for early holders. The decline came as the platform also defended $150 million in stablecoin loans linked to Dolomite.

WLFI traded near $0.0800, down around 15% over the past day. Its market capitalization also dropped by $427 million to $2.54 billion from nearly $3 billion.

World Liberty Defends Dolomite Loans Amid Debt Fears

The slide followed renewed debate over the project’s borrowing activity. On Thursday, World Liberty responded to what it called “FUD” on X after using decentralized finance protocol Dolomite for loans denominated in USDC.

The main concern was whether Dolomite could be left with bad debt if those loans had to be unwound. Critics said the protocol might recover far less than the value of the stablecoins borrowed. World Liberty rejected that argument.

The project said it was “nowhere near liquidation.” It also said that if markets moved sharply against its position, it would add more collateral. World Liberty said that the outcome was not a risk.

World Liberty also said its activity benefits users supplying stablecoins on Dolomite. It said those users are earning outsized stablecoin yields. The project added that traditional markets are offering very little by comparison.

The response did not end the criticism. In a post on X, DefiIgnas said the project had not explained how it would repay the stablecoin debt. He then argued that it could not do so.

DefiIgnas also said WLFI is too illiquid to sell in size. He claimed that selling $8.2 million worth of the token would cause about 72% slippage. That added further pressure to the discussion.

WLFI Unlock Plan Emerges as Collateral Risk Builds

Blockchain analysis firm Arkham Intelligence showed that World Liberty posted around $400 million worth of WLFI as collateral on Dolomite across two wallets. That represented roughly 98% of the token’s supply on the platform. The concentration raised further concern about risk.

At the same time, World Liberty said it is drafting a governance proposal that would let WLFI holders vote on unlocking tokens. WLFI launched last year as a non-transferable digital asset. Any change would mark a major shift in the token’s structure.

According to Token Unlocks, about 75% of the token’s supply remains locked. World Liberty said last March that it raised $550 million across two rounds of WLFI sales. The project said those sales involved 85,000 participants.

Months later, the platform said there was strong demand from early adopters to make WLFI tradable. Token Unlocks data showed that 20% of the total supply was allocated through public sales. That portion carried a paper value of $2 billion.

In a follow-up post on X, World Liberty said the proposal would not unlock all tokens at once. It said the plan would include a long-term vesting and unlock schedule. The project added that the structure would take the health of the ecosystem into account.

Related: WLFI Faces Scrutiny Over New Proposal That Could Limit Investor Voting Rights