World Liberty Financial (WLFI), a virtual asset project known to be linked to Donald Trump, is facing a credibility controversy. It is estimated that its market capitalization decreased by approximately $427 million (about 580 billion won) in a single day due to a combination of allegations regarding "self-collateralized" loans and plans to unlock tokens.
The core of this issue lies in the lending structure conducted by WLFI through the decentralized finance (DeFi) platform Dolomite. According to on-chain data analysis, WLFI-related wallets are understood to have borrowed approximately $75 million (estimated up to $150 million) worth of stablecoins by pledging about 5 billion WLFI tokens, representing about 5% of the total supply, as collateral. During this process, connections between key platform figures and the project have been mentioned, raising concerns about potential conflicts of interest.
There is a prevailing sentiment in the market regarding concerns over a chain reaction of risks. Analysis suggests that WLFI-related assets account for a significant portion of the assets deposited within Doromite, and reports indicate that the utilization rate of stablecoin liquidity has approached a high level following the execution of loans. If the price of WLFI falls further and enters a liquidation zone, the possibility of a so-called "death spiral"—where massive selling pressure occurs due to the token's limited liquidity—is being raised. This is identified as a factor that could affect the stability of the platform as a whole, extending beyond individual assets.
On top of this, discussions within the governance regarding the phased release of initial investor holdings are further pressuring investor sentiment. Concerns are being raised that if the unlock proceeds while a significant amount of tokens are currently locked, potential sell orders could flood the market.
WLFI is reported to have stated that liquidation risk is limited and that it can provide additional collateral if necessary. However, the market remains cautious regarding liquidity and structural risks.
This case is seen as exposing the limitations of the structure in which virtual asset projects secure liquidity using self-issued tokens as collateral. In particular, as transparency controversies have emerged regarding a project linked to a politically influential figure, concerns have been raised that this could impact the future regulatory environment. It is pointed out that investors need to scrutinize the structural stability and governance transparency of projects more closely.
