World Liberty Financial has dismissed market warnings regarding its borrowing activity on the lending platform Dolomite, labeling concerns over its debt health as “FUD.”
Summary
- On-chain data shows World Liberty Financial deposited 5 billion WLFI tokens on Dolomite to borrow $75 million in stablecoins shortly before a major U.S. foreign policy announcement.
- World Liberty Financial dismissed liquidation concerns as FUD.
On-chain data from Arkham reveals that a wallet belonging to the Trump family-backed project deposited approximately 5 billion WLFI tokens into the protocol to secure a $75 million loan in USDC and USD1 stablecoins.
Subsequently, the World Liberty wallet transferred over $40 million to Coinbase Prime just hours after Trump announced a U.S.-Iran ceasefire.
Dolomite was co-founded by Corey Caplan, an advisor to World Liberty; as such, the high concentration of WLFI on the platform has triggered intense scrutiny from DeFi analysts.
Currently, WLFI tokens represent $428.9 million of the $825.4 million in total assets supplied to Dolomite. This means the project’s native token now accounts for more than half of the protocol’s total liquidity, creating what researchers describe as a significant concentration risk.
DeFi analysts on X warned that if WLFI’s price hits liquidation levels, the lack of market depth could result in massive bad debt for the protocol’s other lenders.
“If that WLFI collateral position ever gets close to liquidation, it’s basically unliquidatable without major losses for lenders,” wrote analyst EthanDeFi.
He pointed to the token’s low liquidity relative to its $10 billion valuation, advising users to withdraw stablecoins from any pools that accept WLFI as collateral.
In a series of posts on Thursday, World Liberty countered that its presence as an “anchor borrower” actually helps the platform by providing higher yields for other participants.
The team maintained that they have ample resources to defend their position, noting they have repurchased 435 million tokens over the last six months to support the ecosystem.
“We are nowhere near liquidation — and frankly, even if markets moved dramatically against us, we’d simply supply more collateral,” the team stated.
“That’s not a risk. That’s how this works.”
Despite these assurances, WLFI’s price fell 5.6% to $0.86 as the controversy spread, bringing its total decline over the past week to 14%.
The project is now looking toward a governance vote scheduled for next week to address a long-awaited token unlock for early retail buyers. This plan will involve a structured, phased vesting schedule rather than an immediate release of all tokens.
The team remains firm that the protocol is designed for long-term growth rather than short-term speculation.
“The critics are looking at the wrong thing,” World Liberty added. “We’re building something that compounds.”
Source: https://crypto.news/world-liberty-addresses-risk-concerns-over-5b-wlfi-collateral-position-on-dolomite/
