The governance battle at DeFi lending protocol Aave is starting to cost investors dearly.
The AAVE token is down about 18% over the past seven days, making it the worst performer among the top 100 cryptocurrencies, even as Bitcoin, Ethereum, and other large coins are trading flat or slightly higher.
The sell-off stands out in an already stable market, suggesting the stress is specific to Aave rather than a broader risk-off move.
As CoinDesk reported earlier last week, a growing dispute within Aave’s governance over who controls the protocol’s branding, domain names, and public channels contributed to the price drop. While the debate has largely taken place on forums and social media over the last week, traders appear to have reacted negatively to the uncertainty it creates in terms of control, coordination and future decision-making.
Data tracked by blockchain detective Onchain Lens shows that major shareholders acted decisively. One large holder sold approximately 230,000 AAVE (worth nearly $35 million at current prices) in a short period of time on Monday, exchanging the tokens for Ethereum derivatives and Bitcoin and triggering a sharp intraday drop of nearly 10%.
The move added to the selling pressure that had built up since the governance proposal entered the snapshot vote.
Meanwhile, a wallet tagged by On-Chain Explorer to Aave founder Stani Kulechov suggests he has been buying falling stocks.
Wallet data shows that Kulechov purchased approximately $12.6 million worth of AAVE over the past week at an average price of around $176, with his unrealized losses of approximately $2.2 million as the token slid further.
Founder buying is often interpreted as a signal of confidence, but in this case it wasn’t enough to offset the broader sell-off.
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The difference between AAVE and the rest of the market is staggering. Bitcoin has held steady near $90,000, while Ethereum, XRP and other major currencies have avoided similar declines. This contrast suggests that traders are not broadly de-risking cryptocurrencies, but are instead selectively de-risking protocols facing internal uncertainty.
Unlike macro-driven sell-offs, governance disputes carry unlimited risk.
There is no clear timeline for resolution, and the results can reshape how value flows within the protocol. In the case of Aave, the question of who controls the brand and front-end gateway directly relates to how the DAO exerts power off-chain, and this issue is not suitable for a quick solution.
