Token Price Tumbles on Initial Release as Governance Contemplates Liquidity Fee Repurchase Scheme
World Liberty Financial (WLFI), the Trump-backed venture that has already rolled out a dollar-pegged stablecoin, USD1, which ranks as the sixth-largest by market capitalization, has proposed a significant change in its governance. The proposal aims to redirect all fees from the project's pools towards buybacks and permanent burns.
The core platform of World Liberty Financial was designed as a lending and borrowing service, although it has yet to be launched. This proposed shift in strategy mirrors shareholder-return tactics more common in mature firms than in growth-stage ventures.
The key objective of the proposal is to reduce the supply of WLFI, which is expected to increase the relative weight for committed long-term holders. However, few live products are currently driving organic demand for WLFI, creating uncertainty about the long-term effect on price stability.
If approved, WLFI would use fees from its own liquidity positions on Ethereum, Binance Smart Chain, and Solana to buy back tokens on the market and send them to a burn address. This could potentially limit the flexibility to fund product development, ecosystem incentives, or strategic investments.
WLFI's early whitelisted buyers have reaped significant benefits, with the token currently trading at around $0.245, significantly higher than the $0.015 each they paid at launch. Trading volume for WLFI increased from approximately $259 million at launch to $2.5 billion.
However, the scale of upcoming unlocks for WLFI is likely to exceed the buyback amount, and analyst Min Jung cautions that supply pressures may outweigh the proposal's impact. Ryan Yoon, senior analyst at Tiger Research, believes the buyback-and-burn mechanism should theoretically support token value through supply reduction.
The effect of the buyback-and-burn model may be limited due to WLFI's large implied valuation and relatively low circulating supply. The Trump family, including Eric Trump, who is part of the leadership team within the project, indicates Eric Trump's prominent role. Specific detailed positions beyond this are not explicitly provided in the available information.
The treasury of WLFI may still be sufficient to support future growth. In July, Trump disclosed he had earned a windfall of $57.3 million from the venture. The World Liberty Financial's WLFI token experienced a sharp drop in value, falling from $0.33 to near $0.21, after its Labor Day debut.
The proposal was posted on the project's governance forum, and its approval could mark a significant shift in the strategy of World Liberty Financial. The long-term implications of this move on the price stability and growth of WLFI remain to be seen.
