WLFI's self-rescue backfires into selling spree: long-term holders seize the opportunity to cash out

Original Author: Oluwapelumi Adejumo

Original Translation: Luffy, Foresight News

World Liberty Financial, a crypto project backed by the Trump family, is attempting to rebuild market demand and confidence after its governance token, WLFI, fell to an all-time low.

Facing months of pressure from governance disputes, unlocking concerns, and liquidity doubts, World Liberty Financial has taken multiple measures to respond: burning WLFI tokens, onboarding exchanges, and launching a rewards program linked to the stablecoin USD1, all aimed at revitalizing the entire WLFI ecosystem.

While these measures have boosted market sentiment, they have also created a new liquidity window for long-dormant holders to take profits. This precisely reflects the core dilemma facing the token: price rebounds are still highly dependent on incentive policies, exchange channels, and market confidence in the project's governance.

After Hitting All-Time Low, World Liberty Financial Launches WLFI Burn and USD1 Rewards Program

This round of ecosystem self-rescue originated from a severe market crash. The token of this Trump-affiliated crypto project plummeted nearly 88% from its peak price.

To restore market confidence, World Liberty Financial accelerated its WLFI token burn. On-chain data from blockchain analytics platform Arkham Intelligence shows the project has permanently burned 3 billion WLFI, removing approximately $180.8 million in market capitalization from circulation.

WLFI Burn Record

The community had previously passed a governance proposal to permanently burn 10% of the total tokens held by founders, team, advisors, and partners, amounting to approximately 4.5 billion tokens.

Beyond the burn, the project is positioning the stablecoin USD1 as the core value carrier of its ecosystem. Instead of relying solely on native token demand, World Liberty Financial is leveraging mainstream crypto exchange infrastructure to drive USD1 commercial adoption:

Binance has listed the USD1/BTC trading pair, allowing market participants to use USD1 as collateral for Bitcoin futures contracts for the first time.

Bybit has also integrated USD1, listing it as eligible collateral for margin trading, crypto lending, institutional credit lines, and buy-now-pay-later services.

To accelerate adoption, Bybit and World Liberty Financial jointly launched a USD1 rewards campaign, allocating a pool of 45 million WLFI tokens. Users who stake or hold USD1 can earn up to 20% annualized yield, directly linking WLFI demand to the stablecoin's broader use.

WLFI Rebound Creates Exit Opportunities for Holders

World Liberty Financial's structural token burn and high-yield exchange activities triggered a rebound in WLFI trading, but the sudden influx of market liquidity also brought unintended consequences.

Data from blockchain analytics platform Santiment shows that on May 18, World Liberty Financial recorded its highest-ever realized profit and "token dormancy consumption," far exceeding previous levels.

On that day, the market saw a net sell-off of 1.8 billion WLFI, all for profit-taking.

The "token dormancy consumption" metric (number of moved tokens × holding dormancy period) surged to 17.4 trillion.

Large-scale WLFI Profit-Taking

Santiment noted that this trading surge closely followed Binance's activation of USD1 as futures collateral. The data suggests that while the new exchange channel successfully activated a sluggish market, it essentially became a tool for long-term dormant holders to clear their positions.

Fortunately, the market absorbed most of the selling pressure. After both metrics spiked, WLFI still rose by 5.5%, indicating that new demand from the exchange cushioned the impact of profit-taking. However, the concentrated transfer of a large number of dormant tokens also implies that for a sustained rebound to occur, the market must still absorb the massive backlog of sell orders from early participants.

AI Financial Warning: Risk Spills Over to Public Markets

The financial pressure within the World Liberty Financial ecosystem has now extended beyond the on-chain token market to the balance sheets of publicly listed companies.

A Q1 2026 regulatory filing from fintech company AI Financial (formerly ALT5 Sigma) reveals that digital asset volatility has severely impacted the company's financial structure.

AI Financial's corporate treasury is entirely centered around the World Liberty Financial ecosystem: In August 2025, it completed a $1.5 billion financing round (combination of direct offering and private placement, settled in tokens), purchasing 7.28 billion WLFI at a cost of $0.20 per token.

According to AI Financial's latest financial report as of March 28, 2026:

• The market price crash of WLFI led to an unrealized loss of $348.3 million, reducing the asset's book value to $706.4 million—less than half the purchase cost.
• The impairment dragged down overall performance: the quarterly net loss from continuing operations was $271.3 million, compared to a loss of only $2.4 million in the same period last year.

More critically, contractual lock-ups rendered $706 million in assets completely unusable for daily operations.

Under the token purchase agreement, 3.53 billion tokens are non-transferable for 12 months.

The remaining 3.75 billion tokens are subject to a Securities Purchase Agreement and can only be sold after obtaining shareholder approval, amending the company's charter, and filing an effective resale registration statement with regulators.

Consequently, AI Financial had $10.5 million in cash, $32.2 million in total assets, and $39.1 million in total liabilities at the end of the quarter, resulting in a working capital deficit of $5.5 million.

The cash crunch forced management to issue a clear warning, expressing substantial doubt about the company's ability to continue as a going concern within the next year.

To sustain operations, AI Financial took on new related-party debt. In January 2026, it borrowed nearly $15 million directly from World Liberty Financial. Management disclosed that this cash might be used for stock buybacks and additional WLFI purchases, effectively using project debt to simultaneously support its own public equity and the underlying assets of the ecosystem.

Governance Lawsuit Looms, Ecosystem Controversy Continues

World Liberty Financial's ecosystem crisis extends beyond token price volatility, cash shortages, and accounting adjustments. A governance rights lawsuit is subjecting the project to increased scrutiny.

The project is in a defamation lawsuit with crypto entrepreneur Justin Sun. Sun has publicly accused World Liberty Financial developers of embedding an undisclosed blacklist function in the smart contract.

His legal filings claim this backdoor allows the core team to unilaterally freeze user wallets and restrict individuals from participating in protocol governance. World Liberty Financial denies the allegations and has countersued, claiming that Sun deliberately shorted the token and manipulated governance token flows to Binance during the project's public launch in September 2025 to interfere with project decisions.

Beyond the legal dispute, on-chain records show that World Liberty Financial used 5 billion WLFI as collateral to borrow over $75 million USDC. This action has drawn significant attention from the crypto industry and U.S. lawmakers, with Senator Elizabeth Warren leading an investigation into World Liberty Financial and its ties to the Trump family.

She sent a letter to the SEC requesting an investigation, stating: "World Liberty Financial's actions appear to benefit the Trump family at the expense of investors, who face difficulties in being able to redeem tokens normally. 80% of early investors' holdings were locked, preventing them from selling after the token price crashed."