Aave’s native token, AAVE, slid sharply over the past week, underperforming major cryptocurrencies as internal governance tensions and large holder sell-offs rattled investor confidence.
What Happened
The native token of the decentralized finance protocol Aave, AAVE, has declined sharply over the past week, dropping roughly 18% as key holders liquidated positions amid a deepening governance dispute. Large on-chain sales of more than 230,000 AAVE tokens by a single whale contributed to a significant sell-off, with prices dipping below $160 and breaking through short-term support levels.
The sell-off comes as internal tensions have grown within the Aave ecosystem over a proposal to transfer control of brand assets and redirect swap revenue away from the decentralized autonomous organization (DAO) treasury, sparking disagreements between Aave Labs and token holders.
Why It Matters
The recent downturn highlights how governance conflicts within decentralized protocols can translate directly into price pressure, particularly when major holders act on uncertainty rather than confidence. Long-standing debates over how revenue should be shared between protocol contributors and DAO stakeholders have intensified, raising broader questions about the sustainability of governance models in DeFi.
Large liquidations by whales can exacerbate volatility, especially in tokens with concentrated supply among top holders and thin liquidity at lower price levels. The rapid decline in AAVE’s price among major DeFi tokens underscores how internal governance issues, when paired with significant selling pressure, can outweigh broader market trends.
The conflict also serves as a reminder that Decentralized Autonomous Organizations face structural challenges in balancing protocol incentives with community oversight, and that unresolved disputes can weigh on investor sentiment and token performance.
Market Impact
In addition to price depreciation, AAVE’s weekly performance underperformed many peer tokens, reflecting concentrated selling and a lack of supportive buying around key technical levels. Traders watching on-chain activity noted a spike in selling from large holders, which triggered automated liquidations and increased downward momentum.
Despite continued development activity and DeFi adoption, this episode shows how uncertainty can dominate technical or fundamental considerations in token price action. Market participants are now looking for clarity on the DAO proposal outcomes and whether the broader Aave community can coalesce around a resolution to stabilize sentiment.
