AAVE tumbled 18%, underperforming major cryptocurrencies as a governance clash within the protocol combined with a large holder liquidation to sap market confidence. The sell-off and public disputes have pushed AAVE into a sharper drawdown than peers, raising fresh questions about revenue flows and control of the project.
On 22 december a single large holder sold roughly 230.350 AAVE, swapping the tokens into stETH and WBTC; on-chain records and market reports link that trade to an immediate 10–12% intraday price drop. The concentrated nature of the sale amplified selling pressure and accelerated price discovery to the downside, making AAVE one of the weakest top-100 tokens over the week. Traders should note that concentrated holdings can magnify volatility and reduce effective liquidity during stress.
Beneath the liquidation sits an escalating dispute between the Aave DAO and Aave Labs over revenue allocation, brand assets and frontend integrations. The controversy centers on Aave Labs’ integration of CoW Swap into the protocol’s frontend, which replaced ParaSwap and prompted allegations that swap fee flows have been redirected into a wallet controlled by Aave Labs rather than the DAO’s treasury.
Community members estimate the redirected fees could amount to tens of millions in annual revenue, a figure that has driven heated proposals and governance proposals.
Governance conflict and structural risks for Aave
The disagreement has extended to ownership of brand assets and communications channels, with proposals—including a “poison pill” strategy for the DAO to acquire Aave Labs—surfacing as stakeholders debate control. Founder actions related to brand asset acquisition have further inflamed tensions and deepened uncertainty about whether the protocol’s future will be primarily DAO-led or steered by its core development team.
The combined effect of a large, identifiable sell and a public governance schism has eroded investor confidence and produced sustained bearish pressure on the token. Market participants cited the dispute and the whale trade as the proximate causes of the weekly loss, and the episode has become a test case for how governance friction transmits to token markets.
For risk managers, the event underlines two operational points: concentrated on-chain positions increase liquidation and slippage risk, and governance uncertainty can materially alter expected revenue streams that underpin token value.
