Potential Pitfalls for Investors in World Liberty Financial Token

Analysts at investment bank Compass Point have flagged potential risks for investors in the World Liberty Financial token (WLFI) ahead of its market debut on Memorial Day. This Ethereum-based token is set for exchange listings following its initial introduction as a non-transferable governance token last year.

Market Dynamics

On Memorial Day, only a portion of WLFI’s total supply will be tradable, with the rest remaining locked. This could significantly inflate its apparent value since over 20% of the supply is owned by U.S. President Donald Trump’s family. As these tokens are not tradeable, this ownership could distort the perceived trading price, according to the analysts.

Risks for Retail Traders

The analysts cautioned that if exchanges, such as Coinbase, list WLFI at an inflated fully diluted valuation (FDV), it could adversely affect retail traders, who often suffer losses when engaging with newly launched tokens. They pointed to the example of Trump’s meme coin, introduced in January, which saw 80% of its supply held by insiders and achieved an FDV of $44 billion before trading commenced, only to fall drastically thereafter.

Market Analysis and Trading Strategies

Currently, advanced crypto traders speculate on WLFI’s price. The decentralized exchange Hyperliquid recently announced features resembling perpetual futures contracts, driven by community demand. At present, WLFI’s price on Hyperliquid is around $0.25, with an FDV of about $25 billion, down from its opening price of $0.43.

Despite its upcoming tradeability, WLFI is not as easily accessible as the president’s meme coin, which was available for trade immediately. WLFI has been limited to accredited investors, who must complete a four-step process to unlock and trade their tokens. Approximately 34% of its total supply was set aside for such sales, as outlined in the project’s Gold Paper (whitepaper).

Supply Uncertainty

It remains uncertain how much WLFI’s total supply will be unlocked on Memorial Day. A vote approved earlier this summer indicates that “a portion” of tokens sold to early supporters will become tradable, with more being unlockable through future votes. According to the proposal, tokens belonging to founders, team members, and advisors will have a longer vesting period, reflecting a commitment to the project’s success.