Aave whales buy $500M dip as DAO–Labs governance crisis deepens

Aave’s DAO–Labs governance fight erased about $500M in AAVE value, yet Santiment data shows top holders accumulating and deposits, revenues and sentiment all recovering.

Cryptocurrency analytics firm Santiment has released a comprehensive analysis of decentralized finance protocol Aave and its AAVE token, detailing a governance dispute that led to significant market volatility, according to a report published by the company.

Aave Labs in governance dispute

The governance crisis between the decentralized autonomous organization (DAO) and Aave Labs resulted in approximately $500 million in market value losses for AAVE, the report stated. However, on-chain data indicated that large investors accumulated tokens during the decline rather than liquidating positions.

The disputes originated from disagreements between the DAO and Aave Labs regarding revenue sharing, governance structures, and brand rights, according to Santiment. Allegations emerged that the developer company failed to transfer revenue from certain integrations to the DAO treasury, prompting backlash within the community. Social media posts about AAVE increased sharply beginning in mid-December, the report noted.

Despite the price decline in mid-December, the protocol’s fundamentals remained robust, Santiment reported. Deposits on Aave increased approximately 60% year-over-year, with weekly revenues projected to reach record levels by the end of 2025. The disconnect between price performance and fundamental metrics raised concerns that DAO-company tensions were pressuring the token’s valuation, according to the analysis.

On-chain activity shifted significantly around December 22, Santiment data showed. Large AAVE wallet holders initiated buying positions during the price drop. The share of total AAVE supply held by the top 100 addresses increased from approximately 72% to 80%. Balance increases in wallets holding over one million dollars worth of AAVE suggested supply was being withdrawn from exchanges, potentially indicating a supply squeeze, the report stated.

The governance tension reached a critical point with a vote to transfer the Aave brand and intellectual property rights to DAO control. The vote’s rejection demonstrated significant divisions within the community, according to Santiment. Reports that founder Stani Kulechov purchased substantial amounts of AAVE prior to the dispute intensified the controversy. While no evidence suggested these purchases manipulated governance, the concentration of token ownership raised questions about decentralized decision-making processes, the report noted.

Market sentiment began shifting as Aave Labs signaled a potential policy reversal, Santiment reported. The company announced that revenue from activities outside the core protocol could be shared with AAVE token holders, a move that received positive reception from the community. Following this development, Santiment’s sentiment analysis detected a significant increase in positive comments 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 began, according to the report.

Derivative market data also supported signs of recovery, Santiment stated.

The firm characterized the events at Aave as a real-time stress test for decentralized governance. While discussions between the DAO and Aave Labs continue, the response from long-term investors suggests the crisis is viewed as part of the protocol’s maturation process rather than a catastrophic event, according to the analysis.