Aave (AAVE) Plunges 18% as Governance Turmoil Rocks DeFi Giant
Internal power struggles at one of DeFi's biggest names are hitting investors where it hurts—their portfolios.
Governance Gridlock Spooks the Market
The token's sharp weekly decline isn't just market noise. It's a direct reaction to escalating disputes within Aave's decentralized governance framework. When the committees meant to steer the protocol start butting heads, confidence evaporates faster than liquidity in a memecoin pool.
The Mechanics of Mistrust
These governance clashes aren't abstract debates. They directly impact protocol upgrades, fee structures, and treasury management—the core levers that determine Aave's long-term value. Uncertainty here makes the usual crypto volatility look tame. It turns out, when you replace a CEO with a thousand anonymous voters, you sometimes get a thousand different opinions and no clear path forward.
A Stress Test for "Decentralized"
The sell-off highlights a brutal truth for DeFi purists: the market still punishes perceived instability, whether it's in a traditional boardroom or a digital forum. The promise of decentralized governance is stability through distributed control. The current reality? Sometimes it's just distributed chaos. It's the financial equivalent of trying to write a novel with a hundred co-authors—progress is slow, messy, and everyone hates the ending.
This week's price action is a cold reminder that in crypto, your investment is often a bet on a community's ability to get its act together. For now, the Aave community seems to be doing the exact opposite.
TLDR
- AAVE token has dropped 18% over the past week, making it the worst performer among the top 100 cryptocurrencies
- The decline stems from a governance dispute over control of Aave’s brand, domains and public channels
- A rushed Snapshot vote on an alignment proposal created division within the DAO community
- One large holder sold approximately 230,000 AAVE worth nearly $35 million, triggering a 10% intraday drop
- Founder Stani Kulechov purchased $12.6 million worth of AAVE but broader selling pressure continues
The AAVE token has experienced a sharp decline as internal governance tensions within the Aave DAO have escalated. The token dropped nearly 7% in one day and 18% over the past week.
The controversy began when an alignment proposal was moved to a Snapshot vote by Aave Labs CEO Stani Kulechov. This decision came after several days of debate in the governance forums. However, key contributors say the move to voting happened without full community consensus.
Marc Zeller, a key contributor to the ecosystem, criticized the rush to voting. He argued that important questions remained unresolved. Zeller also pointed out that the vote was scheduled during the holiday period, which could reduce participation from major stakeholders.
stani please come to your senses
it’s clear what $AAVE holders want
the only people defending Aave Labs are.. Aave Labs employees
if you want to develop your own fintech products that’s fine
but an Aave savings app called “Aave” should be owned by the DAO and exclusively… pic.twitter.com/i82tsWGxTN
— lito (@litocoen) December 22, 2025
The proposal author Ernesto Boado said he was not consulted before the proposal moved to the voting phase. He claimed that rushing the vote undermines trust building within the DAO. Boado stated that if he had been consulted, he WOULD not have agreed to the timing.
The governance dispute centers on who controls the protocol’s brand, domains and public channels. This creates uncertainty around future decision-making within the DAO. The conflict has exposed deeper issues in Aave’s governance structure.
Large Holders React to Uncertainty
Blockchain data shows large holders are responding to the governance tensions. One large holder sold roughly 230,000 AAVE worth nearly $35 million on Monday. The holder swapped the tokens for ether derivatives and bitcoin. This sale triggered a sharp intraday drop of nearly 10%.
The selling pressure had already been building since the governance proposal moved to Snapshot. The MOVE to voting added to existing concerns within the community. Trading data shows AAVE with lower highs and constant selling pressure.
Meanwhile, Stani Kulechov has been buying AAVE during the decline. Wallet data shows he purchased approximately $12.6 million worth of AAVE over the past week. His average purchase price was around $176. Kulechov now holds an unrealized loss of about $2.2 million as the token continued to fall.
Stani Kulechov(@StaniKulechov), the founder of @Aave, bought 32,660 $AAVE($5.15M) at $158 again 7 hours ago.
He has bought a total of 84,033 $AAVE($12.6M) at an average cost of $176 over the past week, currently sitting on an unrealized loss of $2.2M.https://t.co/HEXO1r7uQK pic.twitter.com/k0pWQCmwGr
— Lookonchain (@lookonchain) December 23, 2025
AAVE Underperforms Broader Market
The AAVE token is the worst performer among the top 100 cryptocurrencies over the past seven days. Bitcoin has held near $90,000 during the same period. Ether, XRP and other major tokens have traded flat to slightly higher.
This divergence suggests traders are not reducing crypto exposure broadly. Instead, they are selectively avoiding protocols facing internal uncertainty. The governance dispute creates open-ended risk with no clear timeline for resolution.
Community member Aylo raised concerns about recent frontend modifications. He alleged that swap-related revenue is being diverted from the DAO. These allegations are adding fuel to the governance controversy.
The conflict follows the SEC concluding its investigation into Aave, which had reduced regulatory pressure. However, Zeller warned this might reduce participation in voting and ecosystem discussions. The timing of the vote during the holidays compounds these concerns about participation.
The price of AAVE dropped from higher levels as governance uncertainty unfolded. The token has historically recovered once governance transparency is restored. The current dispute will test whether the community maintains trust in the existing governance model.
