A wallet linked to President Donald Trump's World Liberty Financial withdrew about 173 wrapped Bitcoin from Aave V3 on February 5 and sold them to repay $11.75 million in stablecoin debt. This move highlights a critical strategy in voluntary deleveraging, as Bitcoin's decline below $63,000 prompts wealthy investors, or 'whales', to liquidate collateral and reduce leverage. The address identified as WLFI on Arkham Intelligence executed withdrawals of roughly 73 WBTC and 100 WBTC from Aave V3's collateral pool, subsequently repaying 5,037,001 USDC and 6,710,808 USDC in separate transactions.

While the wallet's ownership isn’t officially confirmed, on-chain intelligence platforms and previous reports have associated similar activity patterns with World Liberty Financial's known positions on Aave involving WBTC and ETH collateral. The wallet's actions reflect a strategic pivot, converting Bitcoin exposure into cash to minimize leverage and bolster health factor buffers. Currently, it retains significant exposure, holding approximately 13,298 WETH and 167 WBTC as collateral for $18.47 million in variable-rate USDC debt, with a health factor of 1.54—well above Aave’s liquidation threshold of 1.0.

Chaos Labs reported around $140 million in Aave V3 liquidations within a single day during a recent surge, while 21Shares noted $3.7 billion in liquidations over the weekend. These numbers illustrate a widespread flushing of leverage, impacting not just Aave but the entire decentralized lending landscape as positions hit critical health factor thresholds, forcing collateral sales to cover bad debt. The distinction between voluntary and forced deleveraging lies in execution quality, not market impact. Selling 173 WBTC at $69,000 could yield around $12 million, sufficient for the debt repayment. Waiting for a health factor dip below 1.0 would subject the whale to Aave’s auction process, often at steep discounts during market stress.

Currently, the wallet has a runway but lacks comfort; a 38% drop in collateral value would trigger liquidation. Bitcoin has already experienced declines of up to 50% from its peak, with technical indicators suggesting $38,000 as a potential support level—implying a further 43% decrease from current levels. Therefore, selling collateral to elevate health factor buffers makes sense as a risk management strategy, despite the added selling pressure.

MORE FROM COINTIMES

J.P. Morgan's Gold Forecast Signals Institutional Shift in 2026

J.P. Morgan's bullish gold forecast signals a shift, projecting prices at $6,300 by 2026, driven by structural demand changes and institutional reassessment.

Aave's variable borrow rates react to utilization. As whales deleverage and stablecoin liquidity demand spikes, borrowing costs rise, increasing the overall cost of leverage and prompting more whales to reduce their positions. Concurrently, liquidity conditions worsen: bid-ask spreads widen, order book depth contracts, and slippage on large trades escalates. This creates a feedback loop where selling leads to more selling—not from panic, but due to balance-sheet calculations.

Spot Bitcoin ETF flows are compounding this pressure. The total market capitalization for crypto has fallen below $2.1 trillion from its October peak, with ongoing ETF outflows as institutional investors shift towards safer assets. Recent weeks have seen significant redemptions, contrasting with the accumulation phase of 2024 and early 2025 when ETFs absorbed supply during volatility.

Whales are not capitulating; instead, they're converting Bitcoin into stablecoins to manage their health factors and extend their runway. This approach prevents cascading liquidations, yet it doesn't halt drawdowns. Reduced leverage leads to less capital being reinvested into purchases, changing the dynamics from a bullish leverage-driven environment to one of careful exit management.

The $11.75 million debt repayment through the sale of 173 WBTC encapsulates the dilemma faced by leveraged positions: act now or let protocol mechanics dictate the outcome later. Most are opting for the former, resulting in a market where conviction does not equate to compounding gains but rather orderly liquidation, one WBTC at a time.