Trump-linked WLFI, $427 Million Market Cap Evaporates on 'Unlock' Word

▲ WLFI/ChatGPT generated image

World Liberty Financial (WLFI), linked to the family of former U.S. President Donald Trump, saw its market capitalization evaporate by $427 million in a single day, fueling market anxiety, immediately after it began reviewing a large-scale token unlock and defending its DeFi loans.

According to cryptocurrency media outlet Decrypt on April 9 (local time), WLFI announced that it is drafting a governance proposal to allow transactions for early holders. WLFI, which started last year as a non-transferable digital asset, traded at approximately $0.08 on that day, falling 14% over 24 hours, and its market capitalization decreased from about $3 billion to $2.58 billion.

Another factor that heightened market tension was the USDC loan through the DeFi protocol Dolomite. Decrypt reported that after WLFI took out a $160 million USDC loan, criticism spread on X (formerly Twitter) regarding liquidity concerns and potential liquidation. Some observers pointed out that given WLFI's thin liquidity, if the loan were to be liquidated, Dolomite users could incur losses or face difficulties withdrawing funds.

The market particularly noted the increased utilization rate of the USD1 lending pool. Some raised concerns that a portion of the stablecoins borrowed by WLFI had been moved to Coinbase Prime, and that there was a lack of explanation regarding actual repayment plans. Decrypt reported that while the team's explanations focused on denying the collateral structure and liquidation risks, there was also a reaction that specific details on how to repay the debt were lacking.

WLFI issued a direct rebuttal. The project stated, "We are far from liquidation. Even if the market moves significantly against us, we can simply add more collateral. That's not a risk." They also claimed, "As an anchor borrower, the revenue we generate makes the WLFI market more attractive," asserting that Dolomite users are currently earning high stablecoin yields. It was also mentioned that Corey Caplan, co-founder of Dolomite, serves as an advisor to WLFI.

Decrypt reported that it requested further comments from WLFI but did not receive an immediate response. This incident, highlighting both the possibility of allowing early holder transactions and large-scale stablecoin borrowing, demonstrated that market confidence in the Trump-linked DeFi project was significantly shaken in a short period.

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