WLFI treasury drains USD1 pool liquidity

World Liberty Financial’s treasury has drained liquidity from its own USD1 stablecoin pool after borrowing more than $50 million from Dolomite.

On-chain data shows the treasury deposited around 3 billion WLFI tokens as collateral over five days, pushing utilisation above 100% and leaving the pool with negative liquidity.

“Currently, the borrowing rate on Dolomite is 30%, and it’s completely borrowed out, with liquidity showing -232,000 tokens,”

Wrote one analyst.

The move drove USD1 deposit yields to 35.81% APR, with borrowing costs reaching 30%, reflecting extreme demand caused by a single large borrower rather than broader market activity.

WLFI’s collateral now represents more than half of Dolomite’s total value locked in this market, raising concerns about concentration risk and system stability.

Analysts warn that lenders attracted by high yields may struggle to withdraw funds until the position unwinds, particularly if WLFI token prices fall and trigger liquidations.

The situation has drawn comparisons to previous DeFi stress events, highlighting risks around artificial liquidity, leveraged positions, and potential cascading failures within lending pools.

At the time of reporting, World Liberty Financial price was $0.09821.