WLFI Token Plunges to Record Low Amid Dolomite Collateral Controversy

Key Takeaways

The WLFI token plunged 12% to reach an all-time low since its 2025 debut
The project leveraged its native WLFI tokens as collateral for stablecoin loans on the Dolomite platform
This borrowing activity exhausted Dolomite’s USD1 liquidity pool, preventing other users from accessing withdrawals
Tron’s Justin Sun saw his locked WLFI position decline by more than $11 million within 24 hours
Treasury repurchase operations are currently underwater by approximately 48%

The World Liberty Financial token experienced a sharp 12% decline over a 24-hour period, reaching its lowest valuation since its 2025 introduction. The digital asset traded around $0.0818, compounding weekly declines of 15% and monthly losses totaling 17%.

The dramatic price movement followed a CoinDesk investigation revealing that WLFI had pledged billions of its proprietary governance tokens as collateral within the Dolomite lending infrastructure. Using this collateral base, the initiative secured substantial stablecoin loans, including USDC and its proprietary USD1 token, totaling tens of millions of dollars.

Blockchain intelligence from Arykham verified that a project-controlled wallet deposited 5 billion WLFI tokens as collateral on Dolomite, facilitating approximately $75 million in stablecoin borrowings. Subsequently, more than $40 million of these borrowed assets were moved to Coinbase Prime.

Day 44: We're seeing insane levels of crime once again.
Yesterday, Trump family's crypto project deposited 5% of $WLFI's total supply on Dolomite and borrowed $75 million in stablecoins against it.
5% of WLFI's token supply is worth roughly $500M.
Then, just a few hours… pic.twitter.com/ACqGXpvckg
— Ethan DeFi (@EthanDeFi_) April 8, 2026

This substantial borrowing activity maxed out Dolomite’s available lending capacity, creating a liquidity crisis that temporarily prevented other protocol participants from accessing their deposited capital.

Project Team Addresses Growing Concerns

World Liberty Financial published a detailed response thread on X, characterizing the criticism as baseless fearmongering. The organization emphasized that liquidation risks remain minimal.

“In the event of significant market volatility against our position, we maintain the capability to supply additional collateral,” the team explained. However, skeptics noted that pledging more WLFI tokens to support existing WLFI-backed positions—particularly on a platform where a WLFI advisor holds leadership—compounds circular risk rather than mitigating it.

We are one of the largest suppliers and borrowers on WLFI Markets.
Yes, we supplied WLFI as collateral and borrowed stablecoins. No, we are nowhere near liquidation — and frankly, even if markets moved dramatically against us, we'd simply supply more collateral. That's not a…
— WLFI (@worldlibertyfi) April 9, 2026

Adding to the controversy, Dolomite co-founder Corey Caplan simultaneously serves in an advisory capacity for World Liberty Financial, intensifying questions about potential conflicts of interest among industry observers.

According to project disclosures, WLFI allocated $65.58 million toward repurchasing 435.3 million tokens across six months, achieving an average acquisition price of $0.1507. With current market prices hovering near $0.078, these buyback initiatives represent unrealized losses of roughly 48%.

Significant Losses for Justin Sun

Justin Sun, the founder of Tron, witnessed his immobilized WLFI holdings depreciate by over $11 million in a single trading session. Sun initially committed $30 million to World Liberty Financial during late 2024, subsequently expanding his stake to approximately $75 million.

Following the movement of roughly $9 million in WLFI from Sun’s wallet last year, World Liberty Financial blacklisted his address, effectively freezing his token holdings. According to blockchain analytics provider Bubblemaps, Sun currently possesses approximately 545 million frozen WLFI tokens valued at roughly $45 million—representing a decline exceeding $80 million from previous valuations.

An additional 3 billion WLFI tokens remain in an intermediary wallet following treasury operations conducted on April 2 and April 7, presently valued at approximately $234 million.

Technical indicators show the Relative Strength Index approaching 30, nearing oversold conditions, while the MACD reflects persistent bearish momentum. Immediate support is positioned at $0.079, with potential downside objectives at $0.075 and $0.070 should selling intensity persist.

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Source: https://blockonomi.com/wlfi-token-plunges-to-record-low-amid-dolomite-collateral-controversy/