WLFI, the native token of the Donald Trump–backed crypto platform World Liberty Financial, cratered to an all-time low on Friday as investors digested news reports that the company had lent out tokens on a platform tied to one of its executives. As of midday, WLFI was trading at $0.08, a roughly 82% drop from its all-time high last September when it traded at $0.46.
The size of World Liberty Financial’s loans on Dolomite pose a risk to the token’s price, Nicolas Vaiman, CEO at crypto analytics firm Bubblemaps, told Fortune. Roughly 5% of WLFI’s supply is now collateral on Dolomite, so if WLFI declines significantly in value, the collateral could be liquidated, Vaiman said. This would likely force World Liberty to sell WLFI tokens to repay the loan, exerting additional downward pressure on the token’s price.
Some investor worries also stem from the amount of World Liberty Financial’s USD1 stablecoin that the team borrowed against its WLFI. World Liberty Financial borrowed so much USD1 from Dolomite that there is little left to borrow, meaning users who previously deposited the stablecoin on Dolomite may have trouble withdrawing, Vaiman said.
Still, World Liberty Financial projected confidence on social media Thursday.
Even “if markets moved dramatically against us, we’d simply supply more collateral,” World Liberty Financial wrote. “That’s not a risk. That’s how this works.”
