Original title: 5 reasons why Trump’s World Liberty Financial token crashed and burned  

Original author: Christopher Roark

Original source: https://cointelegraph.com/

Compiled by: Mars Finance, Daisy

The former president’s decentralized finance (DeFi) token has seen poor sales due to multiple issues, including investor restrictions and non-transferability.

Former U.S. President Donald Trump’s token launch was a flop.

Former U.S. President Donald Trump launched his World Free Finance (WLFI) token on Oct. 16. The token’s website claims that it will allow investors to gain voting rights in future decentralized finance (DeFi) protocols.

However, after nearly a day of trading, the token's sales were lackluster. As of 10:00 a.m. UTC on October 17, the token website showed that only 848.63 million WLFI (worth $12.7 million based on the pre-sale price) had been sold, leaving the remaining 1.91 billion tokens (worth $287 million) unsold. The first day's sales accounted for only 4.24% of the total.

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

But despite the former president’s fame, why did the token perform so poorly on its first day of trading? Here are five possible reasons that could explain the token’s poor performance.

Restrictions on purchasing Trump Tokens

Unlike most token presales, which are open to anyone and can be purchased anonymously, Trump’s decentralized finance token is limited to purchases by accredited U.S. investors, or non-residents.

When users first visit the site, they are asked whether they reside in the United States and "qualify as an accredited investor as defined in Regulation D of the U.S. Securities Act of 1933," or if they reside outside the United States.

Users who do not fit into these two categories will not be able to continue browsing the website.

Buyers cannot obtain tokens until they pass a Know Your Customer (KYC) check to verify their identity. Presumably, people claiming to be U.S. residents must provide a sworn statement proving they are accredited investors to pass this check.

According to Investopedia, a U.S. resident investor can only be considered an "accredited investor" if they have an annual income of more than $200,000, a net worth of more than $1 million, or are a general partner, officer, or director of a firm issuing unregistered securities.

These standards effectively exclude the vast majority of Americans.

Users can bypass this requirement by clicking "I live outside the United States," but must then provide proof of residency outside the United States to continue.

Many of Trump’s supporters live in the United States and are not accredited investors, which may be one of the main reasons for the slow token sale.

Under normal circumstances, such a requirement would be easy to circumvent: Crypto users outside the United States could buy tokens from the website and then sell them to U.S. residents on decentralized exchanges.

U.S. residents buying tokens identify themselves using anonymous crypto addresses, making it nearly impossible for the government to determine whether they are U.S. residents, providing sellers with plausible deniability.

However, this did not happen with Trump’s WLFI tokens, as the tokens were 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, nor can they sell them to U.S. residents.

In fact, holders can’t sell the tokens at all. The only thing they can do is wait for the decentralized finance protocol to launch, when its developers claim holders will be able to vote on proposals that affect the protocol.

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

WLFI sale terms and conditions. Source: World Liberty Financial.

The inability to sell tokens means that investors cannot profit by selling tokens at a higher price, nor is there any expectation that holders will profit from the upcoming decentralized finance protocol.

Website crash

Despite only a few hundred million tokens being sold, the site couldn’t handle even that small amount of traffic, with some users reporting that they were met with “this page isn’t working properly” messages when they tried to buy tokens.

Source: Wazz

Some users may not have been able to purchase WLFI due to the website crash, and after reconsidering their plans, they may have changed their minds and decided to keep their funds. This may have further reduced the token sale.

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

People think it's a scam

Another reason for the lackluster token sale could be the widespread perception that the project is a scam or a small-time scam.

Some observers said they believed the non-transferability was being deliberately hidden in order to sell more tokens.

Although non-transferability is clearly stated on the token’s website, some believe the project did not anticipate buyers reading the fine print.

Trump’s announcement of the tokens caused so much controversy on Platform X that a community note appeared stating: “The fine print says that ‘tokens’ are non-transferable and are locked in a wallet so you can’t withdraw them until this ‘program’ sees fit. Please read the fine print!”

Vladimir Djukic, founder of passive income token Reflecto, shared the announcement:

The purchasing process is cumbersome

Another reason for the lackluster token sales could be that the purchasing process is too cumbersome for many potential investors.

Some people may not know if they are an accredited investor because they may not even know what the term means.

Still others may be unsure of what it means to “reside” in the U.S. For example, if a person visits the U.S. a few months out of the year but spends the rest of the time in another country, they may not be sure which button to push.

Even if they successfully reach the token sale page, they must first pass a KYC check before they can proceed to the final step of purchasing. Some users may not trust Sumsub, the company that conducts the KYC check, and may be reluctant to upload their passport or driver’s license.

Even if they are willing to trust a company to conduct a KYC check, they may not be willing to upload their own documents.

The overall cumbersomeness of the purchasing process could be another reason why many backers decide to skip the token sale, even if they believe the token will bring returns in the long run.

Despite the poor token sale, Trump still won support from many in the U.S. crypto community. According to data from the U.S. Federal Election Commission, a Trump-related political action committee raised more than $7.5 million in cryptocurrency between July and September.

Trump’s opponent, Vice President Kamala Harris, is considered more cryptocurrency-friendly than incumbent President Joe Biden, according to research from Galaxy Digital.

She recently sought to appeal to crypto voters, promising to provide sensible regulation of the asset in her “Opportunity Economy Promise.”