The governance token for the Donald Trump-backed cryptocurrency project World Liberty Financial plunged 14% to around $0.08 on Friday, losing $427 million in market cap. The drop followed community concerns about $160 million in USDC loans the project took from the Dolomite DeFi protocol and news that the project is drafting a proposal to unlock its currently non-transferable WLFI token for early holders.
World Liberty Financial‘s WLFI token traded around $0.08 on Friday, a 14% daily decrease. Its market capitalization fell by $427 million to approximately $2.58 billion.
The project responded to community concerns, described as “FUD,” after it borrowed around $160 million in USDC from the Dolomite decentralized finance protocol. Onlookers expressed fear that protocol users could face losses if the loans were liquidated due to WLFI’s thin liquidity.
World Liberty Financial stated, “We are nowhere near liquidation,” in a social media post. The project framed its borrowing as beneficial, claiming it generates yield for Dolomite users who are “earning outsized stablecoin yields right now.”
Some observers found the defense lacking, noting the team did not explain how it would repay the stablecoin debt. Blockchain analysis firm Arkham Intelligence reported the project had posted roughly $400 million worth of WLFI as collateral on Dolomite, representing about 98% of the token’s supply on that platform.
World Liberty Financial is also drafting a governance proposal that would allow WLFI holders to vote on unlocking the token. Currently, approximately 75% of the token’s supply remains locked, according to Token Unlocks data.
The project clarified the proposal would not unlock all tokens immediately but would feature a long-term vesting schedule. World Liberty Financial raised $550 million across two token sales last March.
