The fight over the governance of the DeFi lending and borrowing protocol, Aave, is starting to cost investors enormously.
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 large tokens trade stable to slightly higher.
The sell-off stands out in a market that has otherwise stabilized, suggesting that the pressure is specific to Aave and not a broader movement of risk aversion.
The drop comes after a growing fight within Aave’s government over who controls the protocol’s branding, domains, and public channels, as CoinDesk reported early last week. While that debate largely played out on forums and social media last week, operators appear to be responding negatively to the uncertainty it has introduced around control, coordination and future decision-making.
Data tracked by blockchain sleuth Onchain Lens shows that large holders are acting decisively. One large holder sold approximately 230,000 AAVE (worth almost $35 million at current prices) in a short period on Monday, exchanging the tokens for ether and bitcoin derivatives and causing a sharp intraday drop of almost 10%.
The move added to the selling pressure that had already been building since the governance proposal moved to an instant vote.
At the same time, wallets tagged by chain explorers for Aave founder Stani Kulechov suggest he has been buying the dip.
Wallet data shows that Kulechov purchased approximately $12.6 million worth of AAVE over the past week at an average price of around $176, leaving him with an unrealized loss of around $2.2 million as the token fell further.
Founder purchases are often interpreted as a sign of confidence, but in this case they have not been enough to offset broader sales.
Charging…
The divergence between AAVE and the rest of the market is striking. Bitcoin has held near $90,000, while ether, XRP and other majors have avoided similar declines. That contrast suggests that traders are not de-risking cryptocurrencies overall, but rather selectively reducing exposure to protocols that face internal uncertainty.
Unlike sell-offs driven by macroeconomic factors, governance disputes create undefined risks.
There is no clear timeline for resolution and the results can reshape the way value flows through a protocol. In the case of Aave, the question of who controls the brand and front-end gateways directly affects how the DAO exercises power off-chain, a problem that does not lend itself to quick solutions.
