WLFI Token Hits Record Low Amid Concerns Over Circular Lending Practices

The WLFI token has fallen to its lowest level since its 2025 launch, dropping 12% in a 24-hour window. The decline follows a public defense by the World Liberty Financial team regarding its lending activities on the DeFi protocol Dolomite, whose co-founder serves as an advisor to WLFI. Reports indicate that WLFI utilized its own governance tokens as collateral to borrow stablecoins, a move that effectively drained the USD1 lending pool to the point where other depositors were unable to withdraw funds. While the team describes its role as an 'anchor borrower' intended to generate yield for other users, critics highlight the inherent risk of circularity, as the collateral backing the position is the same token being used to secure the loan on a protocol advised by the project's own team. The project's treasury is currently facing significant losses. Over the last six months, WLFI executed $65.58 million in open-market buybacks of 435.3 million tokens at an average price of $0.1507. With the token now trading approximately 48% below that average, these treasury investments are heavily underwater. Additional pressure may mount as 3 billion WLFI tokens, currently valued at roughly $234 million, remain in an intermediary wallet. Furthermore, a governance proposal to unlock tokens for early holders is expected to be posted next week, potentially increasing sell pressure on a token already struggling with collateral concentration and liquidity constraints.