World Liberty Financial has dismissed concerns about potential liquidation risks after borrowing $75 million using its own tokens as collateral on Dolomite. Analysts warn the transaction, executed just before a major geopolitical announcement, creates high leverage and could pose systemic risks given WLFI’s dominance of the platform’s supply. The company defends its position citing strong revenue and ongoing token buybacks.
World Liberty Financial (WLFI) has reacted to growing market fears following on-chain data showing a significant borrowing position on Dolomite. The team dismissed allegations of liquidation risks, calling recent concerns unfounded speculation.
According to Arkham data, WLFI deposited about 5 billion tokens as collateral and borrowed nearly $75 million in stablecoins. Over $40 million was subsequently moved to Coinbase Prime.
The transaction timing attracted attention as it occurred immediately prior to a U.S. presidential ceasefire announcement. Analysts began scrutinizing the liquidity and potential risks connected with the lending.
Researchers have expressed doubts concerning the collateral structure. Analyst Naeven suggested the use of WLFI, ETH, and stablecoins for new loans indicates increased leverage during stable periods.
Naeven expressed concerns about downside risk, stating a fall in WLFI’s value would negatively impact the collateral itself. Another analyst, EthanDeFi, highlighted risks associated with liquidations due to WLFI’s low liquidity.
Platform data shows significant centralization risks, with WLFI making up over 50% of Dolomite’s $825 million supplied liquidity. This raises concerns regarding protocol stability during market volatility.
However, World Liberty Financial publicly dismissed these arguments, stating the firm is far from insolvency. The company noted it could provide more collateral if market conditions shift.
The firm mentioned its economic performance, citing its USD1 stablecoin earning around $159.5 million in annualized revenue. WLFI has also actively operated in the secondary market, spending $6.5 million to buy back about 43.5 million tokens within six months.
A governance proposal has been submitted focusing on unlocking tokens for early participants. Analysts remain vigilant, monitoring liquidity levels and how Dolomite handles large positions under pressure.
