Aave’s recent governance conflict between the DAO and Aave Labs resulted in a significant market value decrease for the AAVE token, wiping out approximately $500 million. However, data from cryptocurrency analytics firm Santiment indicates that despite the volatility, top holders have been accumulating AAVE, and key protocol metrics such as deposits and revenues are showing signs of recovery. Sentiment surrounding the token has also improved.
Santiment’s analysis highlights the governance dispute, which stemmed from disagreements over revenue sharing, intellectual property, and brand control between Aave Labs and the DAO. This culminated in a failed vote to transfer the Aave brand. Despite the selloff, Aave deposits have seen a substantial increase of roughly 60% year-over-year, and weekly revenues are on track to reach record levels by the end of 2025, underscoring the protocol's resilient fundamentals.
The top 100 AAVE addresses increased their collective share of the token supply from about 72% to 80% during the downturn. This accumulation by large wallets and the founder suggests a perceived governance "stress test" rather than a fundamental collapse of the protocol.
The Governance Dispute Between Aave Labs and the DAO
The governance crisis between the decentralized autonomous organization (DAO) and Aave Labs led to approximately $500 million in market value losses for AAVE. Santiment's report indicates that on-chain data suggests large investors were accumulating tokens during the decline, rather than liquidating their positions.
According to Santiment, the disputes arose from disagreements between the DAO and Aave Labs concerning revenue sharing, governance structures, and brand rights. Allegations surfaced that the developer company had not transferred revenue from certain integrations to the DAO treasury, which prompted backlash from the community. Social media mentions of AAVE saw a sharp increase starting in mid-December, the report noted.
Despite the price decline experienced in mid-December, Santiment reported that the protocol’s fundamental metrics remained robust. Deposits on the Aave platform increased by approximately 60% year-over-year, and weekly revenues are projected to reach record levels by the end of 2025. The analysis suggested a disconnect between the token's price performance and its fundamental metrics, raising concerns that the tensions between the DAO and the company were negatively impacting AAVE's valuation.
Santiment data revealed a significant shift in on-chain activity around December 22. Large AAVE wallet holders began initiating buying positions during the price drop. The share of the total AAVE supply held by the top 100 addresses rose from approximately 72% to 80%. The increase in balances within wallets holding over one million dollars worth of AAVE suggested that supply was being withdrawn from exchanges, potentially indicating a supply squeeze, according to the report.
The governance tension reached a critical juncture with a vote proposing the transfer of the Aave brand and intellectual property rights to DAO control. Santiment noted that the rejection of this vote highlighted significant divisions within the community. Reports indicating that founder Stani Kulechov purchased substantial amounts of AAVE prior to the dispute intensified the controversy. While no evidence suggested these purchases were intended to manipulate governance, the concentration of token ownership raised questions about the effectiveness of decentralized decision-making processes, the report stated.
Signs of Recovery and Improved Sentiment
Santiment reported that market sentiment began to shift as Aave Labs signaled a potential policy reversal. The company announced that revenue generated from activities outside the core protocol could be shared with AAVE token holders, a move that was positively received by the community. Following this development, Santiment’s sentiment analysis detected a notable increase in positive commentary and a limited number of negative remarks. As of the previous day, AAVE reached its highest bull-to-bear commentary ratio since before the dispute commenced, according to the report.
Derivative market data also supported indications of recovery, Santiment stated.
The firm characterized the events at Aave as a real-time stress test for decentralized governance. The analysis concluded that while discussions between the DAO and Aave Labs are ongoing, the response from long-term investors suggests that the crisis is being viewed as a part of the protocol's maturation process rather than a catastrophic event.