World Liberty Financial (WLFI), a decentralized finance (DeFi) project, recently made a significant purchase of 722.213 ETH for 2.5 million USDC, leveraging the Cow Protocol. This acquisition boosted WLFI’s Ethereum holdings to 15.595k ETH, valued at approximately $53.61 million at the time of purchase. The timing of this investment coincided with a market downturn triggered by the Federal Reserve’s final interest rate cut of 2024 and Chairman Jerome Powell’s comments dismissing the possibility of a central bank-held Bitcoin reserve, a proposal championed by former President Trump. This confluence of events created a challenging environment for WLFI’s investment, as the crypto market reacted negatively, with both Bitcoin and Ethereum experiencing significant price drops.
The Federal Reserve’s decision to cut interest rates by 25 basis points, while anticipated, was accompanied by Jerome Powell’s explicit rejection of the idea of a Bitcoin reserve. This proposal, initially put forth by Senator Cyntia Lummis, aimed to allocate 5% of the Bitcoin supply to a strategic reserve funded by Federal Reserve bank deposits and gold holdings. Powell’s statement, asserting the central bank’s legal inability and lack of interest in holding Bitcoin, dampened the optimistic sentiment surrounding Bitcoin’s price trajectory, which had been fueled by former President Trump’s perceived support for the crypto industry. The market reacted swiftly, with Bitcoin plummeting by 6% within hours of the announcement, falling below $100,000 after a week of trading above this threshold and reaching a new all-time high of $108,135. Ethereum followed suit, experiencing an 11% decline to around $3,400.
Despite the market volatility, WLFI has continued its active acquisition of various altcoins, including ETH, WBTC, AAVE, LINK, ENA, and ONDO. This purchasing activity has coincided with a surge in the value of the Cow Protocol’s native token (COW), a platform utilized by WLFI, which experienced a nearly 35% price increase attributed to heightened investor interest. Adding another layer of intrigue, WLFI engaged in a $10.4 million swap of cbBTC for wBTC, effectively siding with Justin Sun, a controversial figure in the crypto world, in his dispute with Coinbase regarding the delisting of wBTC. This move further connects WLFI to Sun, who is a major investor and advisory board member of the project, solidifying the link between Sun and the Trump-aligned WLFI.
The wBTC delisting controversy stems from Coinbase’s decision to remove the popular Bitcoin wrapper issued by BitGo, citing incompatibility with its listing standards. BitGo responded with a lawsuit, alleging that Coinbase’s move was strategically designed to favor its own wrapper, cbBTC. Coinbase countered that Justin Sun’s influence over BitGo presented unacceptable risks to its customers. While the exact nature of Sun’s connection to BitGo remains somewhat ambiguous, his involvement with WLFI is considerably more transparent, marked by a substantial $30 million investment and subsequent appointment to the advisory board. This alliance between Sun and WLFI further complicates the narrative surrounding the wBTC delisting and underscores the complexities of the crypto landscape.
World Liberty Financial, while positioned as a project aiming to democratize and depoliticize finance through decentralized lending, has faced several challenges since its launch. The October public sale of WLFI tokens achieved only a fraction of its initial target, selling just over 4% of the available tokens. This underwhelming performance forced the project to drastically reduce its presale goal from $300 million to a mere $30 million. Beyond the sluggish token sales, WLFI grapples with other internal issues, including a lack of a clear roadmap, entry barriers contradicting the principles of DeFi, and potential conflicts of interest. The project’s requirement that investors be accredited and meet specific wealth thresholds excludes a vast majority of potential participants, a practice seemingly at odds with its stated mission of democratizing finance.
Despite the broader market downturn and WLFI’s internal struggles, Ethereum Exchange Traded Funds (ETFs) saw record inflows in December. Data indicates that these products attracted $1.66 billion in new investments, representing a substantial 74% of the total $2.24 billion inflows since their inception. The market structure for Ethereum ETFs remains concentrated, with BlackRock’s iShares Ethereum Trust (ETHA) dominating the field, recording a single-day inflow high of $292 million on December 5th. Fidelity’s FETH trails behind as the second most popular choice, while other Ethereum ETF providers have seen significantly less investor interest compared to the more evenly distributed investments in Bitcoin ETFs. This stark contrast between the robust performance of Ethereum ETFs and the overall market volatility highlights the nuanced and often unpredictable nature of the cryptocurrency market.
