WLFI Defends Dolomite Loans as Liquidation Fears Spark DeFi Frenzy

by

WLFI Defends Dolomite Loans Amid Liquidation Fears

Key Highlights

  • WLFI deposited 5 billion tokens on Dolomite to borrow $75 million in stablecoins, triggering fresh scrutiny over its leverage structure.
  • Analysts warn that WLFI collateral looping on Dolomite could inflate borrowing power while masking rising liquidation risk.
  • Researchers have noted that WLFI holds over half of Dolomite’s supplied assets, raising concerns that a liquidation event could severely impact lender capital.

World Liberty Financial (WLFI) is responding strongly to worries about its borrowing on the DeFi platform Dolomite. These concerns arose after data showed WLFI had taken out a large loan using collateral.

Concerns grew this week as experts pointed to possible problems with how easily the market could buy or sell the project’s assets, and how it might react to changing conditions. However, the project team downplayed these warnings, calling them attempts to spread fear, uncertainty, and doubt.

Data from Arkham shows that World Liberty moved approximately 5 billion WLFI tokens to Dolomite. They then used these tokens as collateral to borrow around $75 million in stablecoins, mostly USD1 and USDC. Soon after, over $40 million of that borrowed money was sent to Coinbase Prime.

As an analyst, I immediately noticed the timing of these transactions. They occurred right before President Trump announced the ceasefire with Iran, which naturally led us to investigate if the market had enough liquidity to handle these moves without disruption. We also had to assess the potential systemic risk these loans might have introduced to the broader financial system.

Collateral strategy sparks risk debate

Experts studying decentralized finance (DeFi) have expressed concern about the way collateral is being used on the Dolomite platform. Researcher Naeven highlighted a pattern where assets like WLFI, ETH, and stablecoins are being recycled to borrow more money and earn profits, potentially creating risks.

If you’re considering investing to earn high returns, be aware of the following:

The team behind WLFI recently used $450 million worth of WLFI tokens (5 billion tokens total) as collateral on the Dolomite platform.

Specifically:

* One wallet (0x44a…5fad) put up $3 billion WLFI and borrowed $60 million in stablecoins ($50 million USD1 and $10 million USDC), with an interest rate of 1.35%.
* Another wallet (0x5be…7dbb…)

— Naeven (@Naeven_0) April 9, 2026

Naeven explains that this process boosts how much money WLFI can borrow and makes its profits look better. However, he cautions that if WLFI’s price drops suddenly, lenders could face losses from unpaid loans.

EthanDeFi, a financial analyst, pointed out potential problems with selling off WLFI tokens in a recent post on X. Because WLFI isn’t traded very often, he explained that large sell-offs could lead to substantial losses. He warned that if a large amount of WLFI used as collateral gets close to being liquidated, it would be nearly impossible to sell without lenders losing significant money.

Our data shows a significant concentration of risk: WLFI represents over half of the approximately $825 million in total assets provided to Dolomite.

WLFI rejects risk claims

World Liberty Financial has strongly denied any worries about its financial health, stating that it is in a solid position and continues to be important for providing loans.

We’re definitely not going to liquidate, and even if the markets turned against us, we could just add more collateral to cover any losses.

The project highlighted its strong financial performance and growing user base to build trust. The team recently revealed that its USD1 stablecoin is currently earning around $159.5 million per year. In addition, they’ve spent $6.558 million over the last six months buying back 43.5 million WLFI tokens from exchanges, which helps decrease the number of tokens available.

Even with promises of stability and a plan to change how early investors receive their tokens, experts in decentralized finance are still watching things carefully. They’re especially focused on how much money is available on Dolomite and the fact that it relies heavily on just one type of asset as collateral.

Read More

2026-04-10 12:38