DeFi lending and borrowing protocol Aave’s government fight is starting to cost investors dearly.
The AAVE token is down about 18% over the past seven days, making it the worst performer among the top 100 cryptocurrencies, even as bitcoin, ether and other major tokens trade flat to slightly higher.
The sale stands out in a market that has otherwise stabilized, suggesting the pressure is specific to Aave rather than a broader risk-off move.
The drop follows a growing battle inside Aave governance over who controls the protocol’s brand, domains and public channels, as CoinDesk reported early last week. While that debate largely played out in forums and on social media last week, traders appear to be reacting negatively to the uncertainty it has introduced around control, coordination and future decision-making.
Data tracked by blockchain looper Onchain Lens shows large holders acting decisively. A major holder sold about 230,000 AAVE — worth nearly $35 million at current prices — over a brief window on Monday, swapping the tokens for ether derivatives and bitcoin, sparking a sharp intraday drop of nearly 10%.
The move added to selling pressure that had already been building since the government proposal was moved to a Snapshot vote.
At the same time, wallets tagged by onchain explorers to Aave founder Stani Kulechov suggest he bought into the dip.
Wallet data shows that Kulechov bought about $12.6 million worth of AAVE over the past week at an average price of about $176, leaving him with an unrealized loss of about $2.2 million as the token slipped further.
Founder buys are often read as a sign of confidence, but in this case it hasn’t been enough to offset broader selling.
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The difference between AAVE and the rest of the market is striking. Bitcoin has held close to $90,000, while ether, XRP and other majors have avoided similar moves. This contrast suggests that traders are not de-risking crypto in general, but are selectively reducing exposure to protocols that face internal uncertainty.
Unlike macro-driven sell-offs, governance conflicts create unlimited risk.
There is no clear timeline for resolution, and findings can reshape how value flows through a protocol. In Aave’s case, the question of who controls the brand and front-end gateways cuts directly into how the DAO exercises power offchain, a problem that doesn’t lend itself to quick fixes.
