$WLFI Yesterday, I sold all my WLFI spot holdings, very disappointed in this entire project and its related ecosystem. Reflecting on recent developments (for friends who don’t know), it really has some shadows of the Luna collapse in 2022.

The WLFI team took out 5 billion WLFI (their own governance token) from the treasury, collateralized it on Dolomite (co-founder Corey Caplan is also an advisor to WLFI—what a coincidence?!), and borrowed $75 million in stablecoins, of which over $232k was directly transferred to Coinbase Prime (a common channel for institutional coin sales).

This move directly pushed Dolomite’s USD1 pool utilization rate over 100%, with available liquidity once turning negative at -$232k USD1🤡. The interest rate for retail deposits was instantly driven up to 35.81% APR (sounds attractive), and the pool was almost drained by a single large borrower. During the worst period, retail investors couldn’t even withdraw their funds.

Currently, WLFI-related positions account for 55% of Dolomite’s total liquidity, turning this protocol basically into WLFI’s private ATM.

The team’s official response: Don’t FUD, we are “anchoring borrowers” to generate returns for the ecosystem, far from liquidation, and can add more collateral at any time.

Then they threw out a figure to prove “confidence in their own token”:

“Over the past 6 months, we have repurchased 435 million WLFI.”

Sounds impressive, right? The team is genuinely buying back their tokens with real money—classic “bullish on the market” move.

Let’s do some calculations on the average buyback price and current price:
> Average buyback price: $0.1507
> Total spent: $65.58 million
> Current price: $0.08
> Unrealized loss: ~$31 million, loss rate 47%

Just looking at it, they bought high. But combined, it’s even more disgusting: on one hand, high-price buybacks to show confidence; on the other, low-price collateralized borrowing to get real cash, then cashing out and walking away, without any loss.

The cost? Retail investors’ funds locked in Dolomite’s pool are bearing the risk. Even more serious is the long-term negative impact—this is teaching the market how not to trust you in the future. Any positive news or hype will now have to pass the test of “will these guys drain the pool again?”

Does it remind you of Luna?

(In 2022, Terra relied on UST and Luna supporting each other, with Anchor offering nearly 20% APY to attract huge deposits. When confidence faltered, UST de-pegged, the system minted Luna to rescue UST, but the more they tried to save it, the worse it collapsed—about $40 to $50 billion evaporated within days.)

Of course, it’s not exactly the same. USD1 has real reserves with BitGo, not an algorithmic stablecoin like UST.

The more similar layer: using their own token as collateral, ecosystem self-circulation, thin liquidity, team shouting confidence with one hand and cashing out with the other.

The real lesson from Luna isn’t that algorithmic stablecoins will collapse; it’s that when all the pillars of a project are self-created, once confidence wavers, there’s no bottom to the fall.

I’m not betting on this anymore.