Token Drops 18% This Week, Outpacing Losses of ETH, SOL, and ADA

The governance struggle at the DeFi lending and borrowing platform Aave is becoming increasingly costly for investors.

The AAVE token has dropped approximately 18% in the last week, positioning it as the worst performer among the top 100 cryptocurrencies, while bitcoin, ether, and other major tokens have maintained stable or slightly positive performance.

This selloff is particularly noteworthy in a market that has otherwise achieved some stability, indicating that the challenges are unique to Aave rather than indicative of a wider market trend.

This decline comes amid an escalating internal conflict within Aave’s governance regarding the management of the protocol’s branding, domains, and public communication channels, as reported by CoinDesk last week. As discussions unfolded mainly on forums and social media, traders seem to be reacting negatively to the uncertainty surrounding control, coordination, and future governance.

Data from blockchain analytics platform Onchain Lens shows that major stakeholders are making significant moves. One prominent holder liquidated approximately 230,000 AAVE, valued at nearly $35 million at current market prices, in a brief timeframe on Monday. This swap for ether derivatives and bitcoin precipitated a sharp intraday decline of nearly 10%.

This action intensified selling pressure that had been mounting since the governance proposal entered a Snapshot vote.

Concurrently, wallet data linked to Aave’s founder, Stani Kulechov, imply that he has been purchasing during the downturn.

His wallets indicate he acquired around $12.6 million worth of AAVE over the past week at an average price of roughly $176, resulting in an unrealized loss of about $2.2 million as the token has continued its descent.

While founder purchases are often interpreted as a sign of confidence, in this instance it hasn’t been sufficient to mitigate the underlying selling pressure.