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Will those close to Trump’s crypto project revert to their old ways? $484 million in cash was invested WLFI Trump agreed to the Dolomite protocol, and it was used as collateral to borrow USDC stablecoins. The problem is that this guarantee comes from a control fund that has almost no real depth in the market.
If these positions fall, Dolomite’s borrowers may not experience a small loss, but their investments may be liquidated.
A DeFi (DeFi) analyst known as Ignas observed this strategy on the X platform, and noted that this support system represents a serious threat to Dolomite’s lending. The notes on the chain have already appeared, so the question is not whether there is a risk, but whether the borrowers understand how they are investing their money.
https://twitter.com/DefiIgnas/status/2041931046653239706/photo/1
Important points:
- Main deposit: About $484 million of $WLFI tokens have been invested in the Dolomite protocol as collateral.
- Procedure: This collateral is used to extract real value from stablecoins (USDC) in exchange for the lowest exchange rate on the network.
- Bad debts: If the value of $WLFI falls significantly, the value of the collateral will drop below the value of the USDC loan, leaving Dolomite’s borrowers with bad debt.
- Return to trap: The annual yield (APY) of the USDC loan on Dolomite has risen to 13.5%, which is an attractive picture on the surface, but it cannot be repaid in the event of a rush to withdraw funds when bad debts are confirmed.
- Political contribution: Analysts link the potential exit window for $WLFI to a drop in interest in bond funds after the election, a period directly linked to exit incentives for those close to Trump.
- Observations: DOLO’s market capitalization of $15 million makes it vulnerable to the collapse of the protocol; Any public guarantee for bad loans can cause the money to crash in a matter of hours.
How does WLFI’s $484 million fund work and when will it fall?
The structure of the process is straightforward, and this is where its danger lies. Organizations affiliated with the World Liberty Financial project invested $484 million worth of WLFI tokens in the Dolomite protocol, and used them as collateral to borrow USDC.
On paper, it looks like a stable DeFi environment, but in reality, we are facing a ticking time bomb.
WLFI is a sovereign currency, and its demand is driven by politics and the lack of depth in the secondary market. This means that the number of $ 484 million is the number of papers only, not the amount that can be solved in the open market without causing the price of money to fall by 60%, 70% or more in one session.
In short, this assertion is not true in the actual case of liquidation.
If the collateral price falls below the USDC lending rate, due to WLFI’s financial weakness, Dolomite’s liquidation engine will not be able to repay the loan. There is no buyer at the price needed to pay off the lenders, and this is the credit scenario in DeFi: the end of the USDC currency, the worthless collateral being oversold, and the messy process.
Ignas, in his warning on
This rise in prices is not an opportunity for profit, but a sign of trouble. Similar warnings have been issued Stabble Protocol on Solana drops by 62% in Total Value Locked (TVL)when the water pressure increases quietly before the big flow.
The calculation of DOLO costs appears to be difficult; A fund with a net worth of only $15 million cannot withstand a bankruptcy event that includes hundreds of millions of bad debts when the news spreads.
What DOLO borrowers face: Reduced exposure to bad credit
DOLO has a market capitalization of about $15 million, and this number is a good indicator of how much bad news the currency can take before it becomes unbearable.
Dolomite does not appear to be using an insurance fund sufficient to cover hundreds of millions in bad debt, and there is no defense mechanism to cover $484 million in collateral damage.
The 13.5% annual return on USDC that Dolomite is promoting to new depositors is a “yield trap” that Ignas clearly warns against. Investors chasing these yields are tapping into a pool that can’t be returned if the availability of rental properties doesn’t improve.
This is the same thing that has led to the loss of depositors Previous conflicts of DeFi platforms as described also bring hidden risks of bankruptcy.
If bad debts are confirmed on the network, whether it is a fall in the value of WLFI or a forced withdrawal, DOLO will act soon. These large funds do not require institutional pressure to collapse, rather the fear of small investors alone is sufficient to achieve this.
A note Risks in the Dolomite Protocol: $484 million invested in WLFI funds appeared for the first time Cryptonews Arabic.
