Aave Power Struggle Causes $500M Market Cap Slide

The dispute centered on exchange fees paid to Aave Labs, rekindling the dispute over who captures the value of the supposedly decentralized contracts.

Aave’s governance token is reported to have lost half a billion in market value by mid-December 2025 as a public dispute between its autonomous organization (DAO) and the main development team, Aave Labs, rattled investors.

The dispute, detailed in a January 14 report by market intelligence provider Santiment, centers on control of key revenue streams and product assets and has turned into a key test of distribution governance. However, on-chain data shows that large investors are using panic as an opportunity to buy.

Administrative Controversy Shakes Confidence, Then Steadies

According to Santiment, the conflict started in early December, when DAO members noticed that exchange funds linked to the new CoW Swap integration on Aave were being sent to an address controlled by Aave Labs instead of the DAO treasury.

Previously, the same payments flowed to token holders, creating expectations around allocations. However, Aave Labs defended the change as revenue from an independently funded product, causing the disagreement to quickly escalate into a broader dispute over monopoly rights, value capture, and control of the Aave product.

The discussion culminated between December 11 and December 22, 2025, as proposals emerged to move Aave’s intellectual property and brand property under the control of the DAO. The vote, pushed to Snapshot over the holidays, drew criticism for its timing and process, with major market participants, including Wintermute, publicly opposing the alignment plan. Wintermute CEO Evgeny Gaevoy wrote on December 26 that the proposal is vague and risks deepening political conflicts instead of fixing long-term incentives.

As uncertainty spread, AAVE’s price fell nearly 15% from its worst point, contributing to a market capitalization loss of nearly $500 million. Nevertheless, Santiment noted that the fundamentals remained strong, with deposits on the protocol increasing by nearly 60% year-on-year and weekly income reaching record levels by the end of 2025.

Whale Accumulation and Price Action Point to Cautious Optimism

While retail interest has cooled during the conflict, major owners have gone the other way. Data cited by Santiment shows the top 100 AAVE addresses increasing their supply share from around 72% to 80% through December. Exchange rates also fell, a sign that tokens were being pulled into long-term storage rather than being prepared for sale.

You may also like:

Meanwhile, whale buying figures remained muted, suggesting steady accumulation rather than brisk trading. That shift coincided with a shift in tone in early January, after Aave Labs said it would explore sharing revenue generated outside of the main protocol with token holders.

Sentiment metrics tracked by the analytics platform improved significantly on January 13, 2026, reaching their strongest bullish-to-bearish ratio since before the conflict.

Price action also reflects that stability. At the time of writing, AAVE was trading around $178, up about 5% in the past 24 hours and just over 4% for the week, though it remains down more than 9% over the past month and 38% year-to-date.

For many long-term owners, the saga has become a stress test instead of a point, and with Aave Labs defining the road to 2026 ambitions and ongoing management discussions, the coming months will show if this unlikely agreement turns into a clear model of power and profit in the DeFi protocol.