AAVE crashes after DAO governance conflict

AAVE lost over 10% of its price, sliding down to $160. Despite being the leading lending protocol, AAVE weakened at the end of 2025. 

AAVE tokens lost over 10% in the past day, going through a flash crash during early Monday trading. The token returned to $160, trading near the lower range for the past three months. 

The recent Aave crash followed the launch of a new DAO proposal, which was pushed by Aave Labs without full community consensus. The proposal aims to shift the brand and full ownership of Aave to the community. 

The market price crash followed an announcement by Aave founder Stani Kulechov that the proposal was moved to a snapshot stage. 

The community reacted immediately, calling the proposal untimely, and lobbied for a no or abstain vote. 

Until recently, Aave Labs was the main driver of decisions for Aave, with constant oversight from the founder. The proposal points in the direction of turning Aave into a community-owned project. 

The shift from a foundation-led approach to a full DAO may be a shock to some projects. Other platforms like Cardano have also steered to community ownership. For coins like Kaspa, the shift from leadership to community governance did damage to the token price. 

The Aave proposal aims to shift all of the brand’s assets, domains, social media and other copyright into a DAO-controlled entity. The new Aave DAO will aim for anti-capture protections, to prevent whales from controlling the protocol. 

The proposal for a community-owned Aave DAO is still unclear on details, such as the ongoing participation of Aave Labs. The centralized entity has provided most of the stewardship and innovation on Aave, and it remains uncertain if the community can achieve the same results. 

Was the Aave decision rushed? 

The main grievance of the Aave community is that the decision felt rushed, and Aave Labs did not communicate its intentions in advance. 

The proposal originated with X user @ernesto, who also went on to protest that the vote was elevated to snapshot status without his consent. 

“This is not, in ethos, my proposal. Aave Labs has (for whatever reason) unilaterally submitted my proposal to vote in a rush, with my name on it, and without notifying me at all. If asked, I would not have approved it,” warned the Aave contributor @ernesto on X. 

The user presented the proposal for DAO ownership on December 16, but with the idea that a community discussion would follow. Currently, @ernesto has prepared to launch a new proposal if the vote fails, and start another community discussion on the transfer of ownership. 

Additionally, the founder of the Aave Chan initiative warned of additional voting pressures and influences. Marc Zeller warned about increased stakes with previously inactive delegates, which could sway the vote. 

The community also protested that the vote was launched close to the year-end, when the holiday season may prevent the community from organizing and re-staking their tokens. As a result, the push to decentralize Aave was seen as rushed and partially manipulated by delegators. 

AAVE remains one of the most successful DeFi apps in 2025, with over $726M in annualized fees and over $33B in value locked. Despite this, the push to decentralize the organization and hand over ownership to the DAO arrives at a time when a weakening crypto market may threaten lending.

Get up to $30,050 in trading rewards when you join Bybit today