Crypto Quill

World Liberty Financial’s token WLFI plunged over 10% Wednesday to $0.089, wiping out gains as its treasury borrowed $50.44 million in USD1 stablecoins from Dolomite. This move pushed the lending pool past 100% use, locking user funds and spiking rates to 35%. Traders eye oversold signals amid fears of a bigger fallout.

The WLFI treasury, a multisig wallet holding over $1.1 billion in assets, deposited roughly 3 billion WLFI tokens as collateral over five days. It pulled $50.44 million USD1 and $10.3 million USDC from Dolomite, the platform behind World Liberty Markets.

On-chain data shows the funds went to Coinbase Prime, with over $40 million USD1 transferred there. This left the USD1 pool with negative liquidity at minus 232,000 tokens. Supply rates jumped to 35.81% while borrows hit 30%.

Experts call it a risky bet. The collateral, now worth about $440 million, faces wipeout if WLFI drops further.

Price Plunge Hits $0.089 Low

WLFI started the day at $0.099 but sank fast on the news. By evening, it traded at $0.089 with a market cap near $2.82 billion, per CoinMarketCap data.

Daily volume spiked to $90.51 million as panic selling kicked in. The 10% drop erased $280 million in value, testing support at $0.085.

Broader crypto markets held steady, making WLFI’s fall stand out. Thin liquidity amplified the slide, with big orders moving the price hard.

Traders point to added heat from reports tying a WLFI partner to a sanctioned Cambodian group. That fueled selloffs.

Dolomite Pool Locked, Users Trapped

Dolomite’s USD1 market turned chaotic. Utilization topped 100%, meaning no fresh borrows and tough withdrawals for suppliers chasing high yields.

Depositors earned big at first, but now face delays. The treasury’s giant position blocks easy exits until it repays or adds liquidity.

Here are the key pool strains:

• Utilization: Over 100%
• Liquidity: -232,000 USD1
• Supply APY: 35.81%
• Borrow APY: 30%

Metric	Before Borrow	After Borrow
Total Value Locked	$533M	$533M
USD1 Supply	Ample	Exhausted
WLFI Collateral	Minimal	3B tokens

This setup echoes past DeFi squeezes. Lenders worry about bad debt if collateral tanks.

Oversold Signals Spark Rebound Hopes

Technical charts show WLFI deep in oversold zone. The RSI dipped below 30 on daily timeframes, a classic buy signal after sharp falls.

Support at $0.085 holds firm, with volume drying up as sellers tire. A bounce to $0.10 could follow if pool stress eases.

Past dips, like January’s treasury shift from WBTC to WETH, saw quick recoveries. But liquidation risks loom large this time.

Analysts track the $440 million position. A 20% WLFI drop might trigger sales, crashing the token further in low-depth markets.

Trump Backing Fuels Scrutiny and Risks

World Liberty Financial launched in 2024 with Trump family support. It blends DeFi lending with USD1 stablecoin tied to U.S. treasuries.

The project hit $550 million in token sales at $0.015 each. WLFI governs votes on treasury and integrations. Dolomite powers its markets for assets like ETH and stables.

Political ties draw regulators and skeptics. Fears grow that a WLFI flop could taint Trump-linked crypto amid election buzz.

Users feel the pinch now. Those in Dolomite lost easy access to funds, hitting everyday yield farmers. Broader DeFi trust takes a knock too.

Yet, high rates tempt bold players. Strategic treasury plays might boost efficiency long-term, if risks stay managed.

This saga reminds crypto fans of DeFi’s wild side. Bold moves promise yields but hide traps like locked pools and price spirals. Investors lost big this week, but oversold charts offer hope for a snapback.