Trump-linked WLFI, $75 Million Borrowing Shock...Plunges to All-Time Low

▲ WLFI/ChatGPT Generated Image

It has been revealed that Trump-linked cryptocurrency project WLFI undertook large-scale borrowing using its own tokens as collateral. Consequently, its price has plummeted to an all-time low, and market confidence is rapidly shaking.

According to Cointelegraph, a cryptocurrency media outlet, on April 11 (local time), World Liberty Financial (WLFI), which is associated with the family of Donald Trump, borrowed stablecoins worth approximately $75 million using billions of its self-issued tokens as collateral. As this structure was revealed, concerns about liquidity risk and structural vulnerability rapidly spread among investors.

On-chain data shows that WLFI's treasury wallet deposited over 5 billion WLFI tokens as collateral and borrowed stablecoins worth approximately $75 million. Evidence that over $40 million of these funds moved to external exchanges was also detected, leading to speculation in the market about potential cash-outs or over-the-counter (OTC) transactions.

In particular, this borrowing structure sparked controversy over 'circular finance' because it involved obtaining external liquidity by using tokens issued by the project itself as collateral. Critics also pointed out that the platform's overall risk has expanded due to increased reliance on specific entities, with WLFI accounting for approximately 55% of the total deposited assets.

This structure also impacted actual users. With stablecoin pool utilization exceeding 93%, an analysis suggests that general users faced difficulties withdrawing funds, and borrowing costs increased as a side effect.

As market instability grew, WLFI's price plunged in a short period, reaching an all-time low. The project team countered by stating that they were "far from liquidation risk" and could respond by providing additional collateral, but it was insufficient to alleviate investor anxiety.

Meanwhile, this incident is evaluated as another case that reveals the risks inherent in models where the issuer and liquidity provision are combined within a DeFi structure.

*Disclaimer: This article is for investment reference only and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*