Why Is Donald Trump’s World Liberty Financial Falling 10% This Week?

World Liberty Financial’s WLFI token has fallen sharply and reached a new record low. The drop followed fresh debate over the project’s lending activity on Dolomite. The Trump-linked crypto firm defended the position in a public X thread. That response failed to calm holders, and the token extended recent losses.

According to Coincodex, WLFI is down about 15% in 24 hours. Other market trackers showed a drop of about 15% over three days. The selling pressure increased after traders reviewed the project’s borrowing model. The debate centered on collateral, liquidity, and token unlock risk.

Source: CoinCodex

WLFI Borrowing strategy draws fresh scrutiny

The concern began after on-chain data showed WLFI using its own token as collateral. The project then borrowed stablecoins against that position on WLFI Markets, which runs on Dolomite. Reports said the borrowing drained much of the USD1 and USDC lending pools. That limited withdrawals for some existing depositors.

World Liberty Financial did not deny the transactions in its public response. Instead, it said the position was intentional and part of normal market activity. “We are one of the largest suppliers and borrowers on WLFI Markets,” the team wrote. It added that it was “nowhere near liquidation” and could “simply supply more collateral.”

That statement became a key reason behind the latest market reaction. Traders and analysts questioned the logic of adding more WLFI if prices kept falling. A lower token price reduces borrowing power for each unit posted. It also leaves more collateral tied to a weak asset. That setup raised concerns across the market.

However, the project has shared another update on repayments. In a new post, WLFI said, “2 days ago, we repaid $15M USD1 on our WLFI Markets position. Today we repaid another $10M USD1.” It added, “Thank you for your attention to this matter.” The repayment update showed that the firm had started reducing part of the borrowing position.

Liquidity pressure and circular risk weigh on sentiment

Reports said World Liberty Financial posted billions of WLFI tokens from its treasury. Some estimates put the collateral at 5 billion WLFI tokens. Against that, the project borrowed more than $75 million in stablecoins. The borrowing helped lift lending rates, but it also pushed pool utilization very high.

At one stage, the pool utilization rate was reported above 93%. That meant other users faced tighter withdrawal conditions. Critics argued the model created a circular risk loop. If WLFI fell more, the project might need to post even more WLFI. That would increase concentration in the same falling token.

The criticism also focused on governance and structure. Dolomite’s co-founder has also advised World Liberty Financial. That link was added to the questions from market participants. Some traders also pointed to the project’s large weight within Dolomite’s total value locked. Those details added pressure during an already weak trading session.

Buybacks and unlock plans add to selling pressure

World Liberty Financial also disclosed large treasury buybacks in recent months. The project said it spent $65.58 million buying 435.3 million WLFI tokens. The average purchase price was about $0.1507 per token. At current levels, those purchases are deep underwater. That added another negative point for traders.

Reports also said 3 billion extra WLFI tokens were moved into an intermediary wallet earlier this month. At lower market prices, that stash lost value within days. Traders then focused on whether more tokens could follow the same lending path. That fear added to pressure on the token.

Another issue is the upcoming vote on token unlocks. The team said a proposal for early holders would be posted next week. It described the plan as a “structured, phased approach.” Even so, some traders worry that new supply could reach the market soon. With sentiment weak, that risk has kept WLFI under pressure today.