WLFI surged 33% within 24 hours, and Sun Yuchen seems to have won again?

Author: 0xcber

Since its listing, the price trend of World Liberty Financial (WLFI), deeply involved by the U.S. presidential family, has been dramatic. Following a sharp drop on the issuance day, WLFI experienced a surge, recovering to 0.25 USDT on September 7, with a maximum increase of 33% in 24 hours. According to the cryptocurrency community's tradition of rewarding those who rise, and investors' faith in the Trump family, the first crisis after WLFI's issuance is expected to have been smoothly overcome.

With a significant increase in market capitalization, Sun Yuchen, who holds over 3 billion WLFI, undoubtedly made a fortune overnight, with unrealized gains exceeding 100 million USD.

Just a day earlier, he was heavily criticized by many as the main reason for WLFI's post-issuance drop.

At that time, the market was filled with bearish voices about WLFI, with many people attacking Sun Yuchen, claiming he was selling coins and that his address was frozen. Many then heavily shorted WLFI, resulting in significant losses.

One can question Sun Yuchen, but one cannot question his ability to make money and his good luck; this statement has once again been proven true.

Mechanism Flaws Lead to a Stampede-like Sell-off

When we review this incident, data shows that Sun Yuchen's actions were clearly not the main reason for WLFI's post-issuance drop. The flaws in the token project model and the realization of early gains were the primary reasons.

As a DeFi project supported by the Trump family, WLFI has attracted much attention since its launch, but its token price quickly fell below the issue price, rising from an opening of $0.20 to around $0.50, then rapidly dropping to around $0.15, resembling the trajectory of the TRUMP coin's issuance.

Why did similar trends occur? The gap between early expectations and reality was too large.

WLFI has a total supply of 100 billion tokens, but approximately 24.67 billion to 27.15 billion tokens were unlocked for circulation at launch, accounting for 24%-27% of the total supply. This far exceeded the market's expected initial circulation of 5 billion and gradual release. Therefore, around September 1, criticism of WLFI in the market had already intensified, with many KOLs advising retail investors to stay away from WLFI, or they would end up unfortunate.

According to CoinMarketCap data, after WLFI was listed on DEX across multiple chains including Ethereum, Solana, and BNB Chain, the initial circulation directly increased the possibility of sell-offs. At the same time, WLFI did not explain the reason for the one-time release of such a large circulation.

WLFI's token economics design has obvious shortcomings, particularly the inadequacy of the lock-up mechanism and relatively weak market maker support. Although the project had a preset unlocking timetable (with the September unlock corresponding to 5% of the total supply), the early unlock scale was too large, and no corresponding lock-up incentives were announced, significantly enhancing the short-term cash-out motivation of early subscribers.

Moreover, typical projects often utilize market makers to stabilize market fluctuations during initial issuance. This time, the absence of market makers led to insufficient liquidity, and seeing such a large-scale unlock sell-off, market makers found themselves unable to support the market.

WLFI's market operation awareness is as immature as a newcomer, which directly amplified the extent of the drop.

Since its peak in January, the TRUMP coin has remained sluggish, with significant market capitalization evaporation, costing many retail investors their tuition fees. Unlike the MEME nature of the TRUMP coin, WLFI, starting from the goal of building decentralized finance, should have gradually built up to raise market prices. However, its initial market capitalization reached 30 billion USD, directly placing it among the top ten crypto assets, making subsequent valuation growth evidently weak.

Retail investors learned the lesson of "quick cashing out" from TRUMP, making the initial sell-off wave of WLFI a foregone conclusion. Even if Sun Yuchen had the potential to crash the market, it would be quite normal; however, the question is: does Sun Yuchen really have the chips to crash the market?

600 Million vs. 27.2 Billion: Sun Yuchen Probably Can't Crash It

The drop and rapid decline of WLFI intensified criticism of the project team before and after the opening, and at this moment, rumors of Sun Yuchen "crashing" WLFI emerged. However, those questioning him provided no evidence, relying solely on hearsay.

Based on the principle of presenting facts and reasoning, as well as the traceable nature of blockchain, an analysis of on-chain data and timelines shows that such accusations are merely a jest. As for whether it was later maliciously exploited, opinions may vary.

As an early investor, Sun Yuchen purchased WLFI tokens worth 75 million USD. On September 1, his unlocked share was only about 600 million WLFI (20% of the unlock quota), which is negligible compared to the project's overall first-phase unlock of about 27.2 billion tokens.

There is also an interlude here: WLFI's unlocking was first completed by returning all tokens from early subscribers, and then the project team returned the first-phase unlocked tokens, indicating that they did not initially design a proper lock-up and unlocking mechanism, but rather came up with a temporary solution.

Moreover, according to analysis from well-known industry institution Nansen, the price drop occurred hours before Sun Yuchen's transfer to Binance, primarily due to institutional selling pressure and large orders on DEX, rather than his personal actions. Compared to Sun Yuchen's transfer of about 55 million tokens, other top eight holders cashed out on the first day of listing. This was the main source of pressure.

On-chain tracking shows that most of Sun Yuchen's WLFI holdings have not moved. Although the WLFI team froze his wallet (claiming it was to prevent phishing), they also admitted that this was more of an internal project decision rather than conclusive evidence of market crashing behavior.

Opinions in the industry vary regarding whether Sun Yuchen heavily crashed the market. On-chain data clearly does not support the conclusion that Sun Yuchen crashed the market, but as a significant player in the industry, his actions, which are habitually magnified, could still have a substantial impact on the market.

However, the freezing of Sun Yuchen's account severely undermined the project's "decentralization principle," which is a common view in the industry. A project that claims to be decentralized finance can so easily freeze a large amount of an early investor's assets through centralized means, which completely contradicts its proclaimed decentralization principle. This indicates that there may be significant flaws in WLFI's decentralized governance.

Ki Young Ju, CEO of CryptoQuant, stated on social media that he supports Sun Yuchen's sale of unlocked tokens, believing there is nothing wrong with this action. He stated that the WLFI foundation should be held accountable for implementing "debanking" measures against users, which contradicts its established purpose.

Deep Fog: Heavy Losses for Short Sellers

In this WLFI drop incident, Sun Yuchen "passively" made a fortune, while those like Ma Ji who seized the opportunity to go long also profited. The project team has passed its first test after issuance. So, who are the losers?

Clearly, it is the short sellers who were misled by market sentiment. Influenced by market emotions, many heavily shorted WLFI after the price drop, resulting in significant losses. Data shows that in the last 24 hours, the WLFI short sellers faced a liquidation of 10.41 million!

Do not underestimate the dark side of human nature behind trading. Behind various rumors, it is hard to say there are no profit motives. Those who criticize Sun Yuchen and bear bearish sentiments towards WLFI may be individuals who have long disliked him, but they could also be those hoping to scoop up cheap tokens and kill short positions. The more they create a negative atmosphere, the more they may profit.

Data shows that as of September 7, WLFI's RSI indicator was nearing the oversold region, with short-term selling pressure close to its limit, indicating strong rebound demand. The strategic cooperation between WLFI and ALT5 Sigma, the steady progress of USD1, and the Trump family's actual influence globally—these important conditions and facts have been intentionally or unintentionally overlooked.

Behind this, it is hard to say it is not part of a larger scheme. Those lacking independent judgment and easily swayed by market emotions are easily misled.

To borrow a classic saying from Zhao Benshan, "Haiyan, you should be more cautious!"