Aave’s governance token reportedly lost half a billion dollars in market value in mid-December 2025 as a public conflict between its decentralized autonomous organization (DAO) and the core development team, Aave Labs, rattled investors.
The dispute, detailed in a January 14 report by market intelligence provider Santiment, centered on control of key revenue streams and brand assets and has evolved into a critical test for decentralized governance. However, on-chain data shows that large investors used the panic as a buying opportunity.
Governance Clash Shakes Confidence, Then Steadies
According to Santiment, the tension traces back to early December, when DAO members noticed that swap fees tied to a new CoW Swap integration on Aave were being routed to an address controlled by Aave Labs rather than the DAO treasury.
Previously, similar fees had flowed to token holders, creating expectations around shared upside. However, Aave Labs defended the change as revenue from a product it funded independently, causing the disagreement to quickly grow into a broader debate over governance rights, value capture, and control of the Aave brand.
Discussion peaked between December 11 and December 22, 2025, as proposals emerged seeking to move Aave’s intellectual property and branding assets under DAO control. The vote, pushed to Snapshot during the holiday period, drew criticism for timing and process, with major market participants, including Wintermute, publicly opposing the alignment plan. Wintermute CEO Evgeny Gaevoy wrote on December 26 that the proposal lacked clarity and risked deepening political infighting rather than fixing long-term incentives.
As uncertainty spread, AAVE’s price slid about 15% at its worst point, contributing to the roughly $500 million drop in market capitalization. Still, Santiment noted that fundamentals stayed firm, with deposits on the protocol going up around 60% year over year and weekly revenue reaching record levels in late 2025.
Whale Accumulation and Price Action Point to Cautious Optimism
While retail interest cooled during the dispute, large holders moved the other way. Data cited by Santiment shows the top 100 AAVE addresses lifting their share of supply from about 72% to 80% through December. Exchange balances also fell, a sign that tokens were being pulled into long-term storage rather than prepared for sale.
Meanwhile, whale transaction counts stayed muted, suggesting steady accumulation instead of frantic trading. That shift coincided with a change in tone in early January, after Aave Labs said it would explore sharing revenue generated outside the core protocol with token holders.
Sentiment metrics tracked by the analytics platform flipped more positive by January 13, 2026, reaching their strongest bullish-to-bearish ratio since before the dispute.
Price action is also reflecting that stabilizing mood. At the time of writing, AAVE was trading around $178, up nearly 5% in the last 24 hours and just over 4% on the week, although it remains down more than 9% over the past month and 38% year over year.
For many long-term holders, the saga has become a stress test rather than a breaking point, and with Aave Labs outlining an ambitious 2026 roadmap and governance talks still ongoing, the coming months will show whether this uneasy truce turns into a clearer model for power and profit in the DeFi protocol.
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