Trump-backed WLF suffered a Waterloo: Only 4% of tokens were sold in 3 days. Five major reasons for analysis

The token issuance supported by former US President Donald Trump was a failure in some ways.

On October 16, former US President Donald Trump launched his World Liberty Financial (WLFI) token (see Golden Finance's previous report "Deep Digging into the Trump Family-supported WLF: Who is the suspected OEM behind the scenes"). The token's website claims that it will allow investors to obtain voting rights on future decentralized finance (DeFi) protocols.

However, after nearly a full day of trading, sales of the token have been tepid. As of 10:00 a.m. UTC on October 17, the token's website showed that only 848.63 million WLFI (based on the pre-sale price, worth $12.7 million) were sold, and 19.1 billion tokens (US$287 million) were unsold. The first-day sales accounted for only 4.24% of the total sales.

Number of WLFI tokens sold. Source: World Liberty Financial.

Here are five reasons to explain the token’s surprisingly poor performance.

Restrictions on who can buy
Unlike most token presales, which are open to anyone and can be purchased anonymously, only accredited US investors or non-residents can buy Trump DeFi tokens.

When users first visit the site, they are asked whether they live in the US and “meet the requirements to be considered an ‘accredited investor’ as defined in Regulation D under the Securities Act of 1933,” or live outside the US.

Users who do not fall into either category are not allowed to access the site further.

Buyers are not allowed to obtain tokens unless they first pass a Know Your Customer (KYC) check to verify their identity. Presumably, people who claim to be US residents must provide a sworn statement that they are an accredited investor to pass this check.

According to Investopedia, US resident investors can only be considered “accredited” if they have an annual income of more than $200,000, a net worth of more than $1 million, or are general partners, executive officers, or directors of a company that issues unregistered securities.

These criteria effectively exclude the vast majority of Americans.

Users can bypass this requirement by clicking “I live outside the United States,” but then they must provide proof of residency outside the United States to proceed.

The fact that many Trump supporters live in the United States and are not accredited investors is likely the main reason for the token’s weak sales.

In general, such requirements are easily circumvented. Crypto users outside the United States can buy tokens from the site and then sell them to U.S. residents through decentralized exchanges.

U.S. residents who buy tokens will identify themselves using crypto addresses, making it nearly impossible for the government to determine whether they are U.S. residents and giving sellers plausible deniability.

However, this does not happen with Trump’s WLFI token, which is not transferable.

WLFI is not transferable or tradeable
Unlike most cryptocurrencies, WLFI cannot be transferred from one wallet to another. This means that accredited investors cannot sell tokens to non-accredited investors, and anyone outside the United States cannot sell them to U.S. residents.

In fact, holders cannot sell tokens at all. The only thing they can do with the tokens is wait for the DeFi protocol to be released, when its developers claim that holders will be able to vote on proposals affecting the protocol.

The terms and conditions of the token sale clearly state that the tokens cannot be transferred to other users.

The inability to sell the tokens means that investors cannot profit by selling the tokens at a higher price, and it is impossible for token holders to profit from the upcoming DeFi protocol.

The website crashed
Despite only a few hundred million tokens being sold, the website couldn't even handle such a small amount of traffic. Some users reported that they encountered the message "This page is not working properly" when they tried to buy tokens.

Since the website is down, some users may not be able to buy WLFI, and after thinking about their plans, they may have changed their minds and decided to keep their money. This may have further reduced the sale of tokens.

The WLFI team has not yet explained the reason for the website crash, but they may have expected sales to be worse than they were. Therefore, they may not have prepared enough servers to handle the website's traffic, causing the website to crash and make the situation worse.

People think it’s a scam
Another reason for the weak token sale could be the general perception that the project is a scam or a small scam.

Some observers have expressed that they believe the lack of transferability was intentionally hidden from buyers in order to sell more tokens.

While the lack of transferability is clearly stated on the token’s website, some believe the project doesn’t expect buyers to read the fine print.

Trump’s announcement of the token was so controversial on X that it caught the community’s attention. The note states, “In the fine print, it states that the ‘tokens’ are non-transferable and locked in a wallet, so you cannot withdraw your tokens until a time the ‘program’ sees fit. Please read the fine print!”

Vladimir Djukic, founder of Reflecto Passive Income Token, shared this:

The purchasing process is cumbersome
Another reason for the weak token sale could be that the purchasing process is too frustrating for many potential investors.

Some people may not know if they are accredited investors, as they may not even know what the term means.

Others may be unsure of what “living” means in the United States. For example, if a person visits the US for a few months of the year but spends the rest of the time in another country, they may not be sure which button to press.

Even if they make it to the token sale page, they must first pass a KYC check before they can proceed to the final step of the purchase. Some users may not trust the Sumsub company that performs the KYC check and may not be willing to upload their passport or driver's license.

Even if they are willing to trust the company that performs the KYC check, they may simply not be willing to upload their documents.

The overall tediousness of the purchase process may be another reason why many supporters decide to skip the token sale, even if they believe that the tokens will pay off in some way in the long run.

Despite the poor token sale, Trump still has the support of many in the US cryptocurrency community. According to the US Federal Election Commission, the political action committees of Trump allies raised more than $7.5 million in cryptocurrency between July and September.

Trump's opponent, Vice President Kamala Harris, is also considered more crypto-friendly than incumbent President Joe Biden, according to research by Galaxy Digital.

She recently tried to attract crypto voters by promising to provide reasonable asset regulation as part of her "opportunity economy promise."