The value of the Aave (AAVE) token fell by more than 8% on Saturday, following speculation that the decentralized finance (DeFi) protocol would receive a different token distribution from World Liberty Financial (WLFI), a DeFi platform supported by members of former President Donald Trump’s family.
“The WLFI team informed WuBlockchain that the assertion that ‘Aave will receive 7% of the total WLFI token supply’ is unfounded and misinformation,” blockchain journalist Colin Wu stated, igniting a discussion regarding the rumor and the token allocation on social media.
Wu referred to a WLFI community proposal from October 2024, which described an arrangement wherein the Aave decentralized autonomous organization (DAO), tasked with managing the protocol, would acquire 7% of the WLFI governance token’s circulating supply and 20% of the protocol revenues generated from the WLFI deployment on Aave v3.
Aave founder Stani Kulechov described the proposal as “the art of the deal” on Saturday, and in a subsequent post, indicated that the terms of the proposal were still in effect. Following the rumors, Aave’s token dropped from approximately $385 to a low of $339 before recovering to around $352.
Cointelegraph attempted to contact representatives from World Liberty Financial and Aave, but no response was received by the time of publication.
Speculation regarding the arrangement between Aave and World Liberty comes amid a renewed interest in DeFi and increasing institutional participation in the cryptocurrency space.
Related: $70B DeFi protocol Aave launches on Aptos, expanding its ecosystem
The DeFi sector is gaining momentum as institutions become involved
The total value locked (TVL) in DeFi protocols currently exceeds $167 billion, according to DeFiLlama, inching closer to the all-time high of over $212 billion recorded in December 2021.
DeFi TVL experienced significant growth following the outcomes of the 2024 US elections, driven by expectations of a more favorable regulatory environment for cryptocurrencies in the nation.
Institutional investors, including banks, asset managers, corporations, and financial services firms, have increasingly engaged with crypto and DeFi, influencing many of the narratives throughout the current market cycle.
This engagement has ignited discussions amongst the crypto community regarding the encroachment of government regulations on permissionless protocols and the potential takeover of DeFi by traditional financial entities.
Magazine: How Ethereum treasury companies could trigger ‘DeFi Summer 2.0’
