The Aave (AAVE) token’s price dropped by more than 8% on Saturday due to speculation that the decentralized finance (DeFi) protocol was slated to receive an alternative token allocation from World Liberty Financial (WLFI), a DeFi platform backed by associates of former US president Donald Trump.
According to blockchain reporter Colin Wu, the WLFI team stated to WuBlockchain that the assertion that “Aave will receive 7% of the total WLFI token supply” is inaccurate and constitutes fake news. This ignited a discussion regarding the rumor and token agreements on social media.
Wu referenced a WLFI community proposal from October 2024, which detailed an arrangement for the Aave decentralized autonomous organization (DAO) to receive 7% of the WLFI governance token’s circulating supply and 20% of the revenues generated by the WLFI deployment on Aave v3.
Aave token price declines amid rumors. Source: TradingView
Aave founder Stani Kulechov referred to the proposal as “the art of the deal” on Saturday, and in another post, indicated the proposal’s terms were still active. Following the rumors, Aave’s token price fell from around $385 to a low of $339 before recovering to approximately $352.
Cointelegraph attempted to contact spokespeople for World Liberty Financial and Aave but did not receive a reply by the publication time.
Speculations regarding the relationship between Aave and World Liberty arise amid an increased interest in DeFi and a rise in institutional participation in the cryptocurrency sector.
Related: $70B DeFi protocol Aave goes live on Aptos in ecosystem expansion
DeFi sector growing as institutions engage
The total value locked (TVL) in DeFi protocols exceeds $167 billion, according to DeFiLlama, inching closer to the all-time peak of over $212 billion recorded in December 2021.
DeFi TVL surged significantly post the 2024 US elections, anticipating a more favorable regulatory landscape for cryptocurrencies in the nation.
DeFi TVL surged significantly following the 2024 elections in the United States. Source: DeFiLlama
Institutional participants, including banks, asset managers, corporations, and financial services firms, are increasingly engaged in crypto and DeFi, influencing numerous narratives throughout the current market cycle.
This involvement has triggered discussions within the crypto community about the potential impact of government regulations on permissionless protocols and the possible assimilation of DeFi by traditional finance entities.
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