Cryptocurrency analytics company Santiment has published a comprehensive review of the decentralized finance (DeFi) protocol Aave and its AAVE token.
According to the report, the governance crisis between the DAO and Aave Labs within the Aave ecosystem quickly had a significant impact on the market, leading to a decline of approximately $500 million in AAVE’s market value. However, on-chain data revealed that large investors viewed this period as an opportunity for accumulation rather than selling.
According to Santiment, the disputes stemmed not from any security breach, but from disagreements between DAO and Aave Labs regarding revenue sharing, governance, and brand rights. Allegations that the developer company did not transfer revenue from some integrations to the DAO treasury caused a strong backlash within the community. This led to a sharp increase in social media posts about AAVE starting in mid-December.
The report stated that despite a decline in AAVE’s price in mid-December, the protocol’s fundamentals remained strong. Deposits on Aave had increased by approximately 60% year-on-year, and weekly revenues were projected to reach an all-time high by the end of 2025. However, the fact that the price did not reflect this positive picture reinforced market concerns that “DAO-company tensions are putting pressure on the price.”
According to Santiment data, on-chain activity changed significantly around December 22nd. Large AAVE wallets took buying positions instead of selling during the price drop. The share of the top 100 addresses in the total AAVE supply increased from approximately 72% to 80%. The increase in balances, particularly for wallets holding over one million dollars worth of AAVE, indicated that supply was being withdrawn from exchanges and suggested a potential supply squeeze.
The governance tension culminated in a vote to transfer the Aave brand and intellectual property rights to DAO control. The rejection of the vote demonstrated significant divisions within the community. Furthermore, news that founder Stani Kulechov had purchased a large amount of AAVE prior to the dispute further fueled the controversy. While there was no evidence that these purchases manipulated governance, it was noted that the concentration of token ownership hindered decentralized decision-making processes.
Santiment reported that market sentiment began to shift as Aave Labs signaled a potential reversal. The company’s announcement that revenue from activities outside the core protocol could be shared with AAVE token holders was positively received by the community. Following this development, Santiment’s sentiment analysis observed a significant increase in positive comments and a limited number of negative comments. As of yesterday, AAVE reached its highest bull/bear commentary ratio since before the dispute.
Derivative market data also supported the recovery.
In conclusion, Santiment described the process at Aave as a real-time stress test for decentralized governance. While discussions continue between the DAO and Aave Labs, the reaction of long-term investors indicates that this crisis is not seen as devastating for Aave, but rather as part of its maturing process.
*This is not investment advice.
