- WLFI-linked wallet repaid $11.75M USDC to reduce liquidation risk on Aave V3.
- Market volatility drives proactive deleveraging to avoid steep protocol liquidation losses.
- Despite reduced risk, a 38% drop in collateral could still trigger forced liquidation.
A wallet linked by on-chain analysts to World Liberty Financial has moved to reduce risk as Bitcoin volatility pressures leveraged positions across crypto lending markets. The activity has fueled speculation about whether the project tied to Donald Trump is selling Bitcoin to stay solvent.
While no official confirmation exists, recent blockchain transactions show deliberate steps to lower exposure and avoid forced liquidations. The moves come as Bitcoin weakness pushes borrowers to defend collateral positions before protocol thresholds trigger automatic sales.
Strategic Deleveraging, Not Forced Selling
On Feb. 5, a wallet labeled as WLFI by Arkham Intelligence withdrew roughly 173 wrapped Bitcoins from Aave V3. The wallet converted that collateral into liquidity and repaid $11.75 million in USDC debt. Consequently, its Aave health factor improved to 1.54, safely above liquidation levels.
The transactions occurred in two steps. First, the wallet removed 73 WBTC and 100 WBTC from Aave collateral pools. Next, it repaid more than $11.7 million in stablecoins through separate repayments. Besides reducing liquidation risk, the move restored borrower control over execution timing.
Although ownership remains unconfirmed, analysts link the address to earlier WLFI activity involving WBTC and ETH collateral. Moreover, the wallet still holds significant leverage. It maintains over 13,000 WETH and 167 WBTC as collateral backing roughly $18.5 million in variable USDC debt.
Why Large Holders Are Reducing Risk
Market-wide stress explains the urgency. According to Chaos Labs, Aave V3 saw about $140 million in liquidations within 24 hours during recent volatility. Additionally, 21Shares flagged $3.7 billion in crypto liquidations over the weekend.
These figures highlight systemic deleveraging rather than isolated distress. However, voluntary repayments differ sharply from forced liquidations. Selling collateral early avoids protocol auctions that often apply steep discounts during fast declines.
Selling 173 WBTC near $69,000 generated enough liquidity to clear debt efficiently. Waiting longer could have triggered discounted sales beyond the borrower’s control. Hence, proactive deleveraging often preserves more capital, even if it adds near-term selling pressure.
Risk Still Lingers
Despite the improved buffer, risk remains. A 38% drop in collateral value could still push the wallet toward liquidation. Bitcoin has already declined sharply from recent highs trading around $70,000, and some technical models point to deeper downside potential.
Related: “I Lost $3 Billion but Didn’t Quit”: ADA Founder on Crypto Crash
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Source: https://coinedition.com/is-trump-selling-bitcoin-wlfi-repays-aave-loans-to-avoid-liquidation/
