Cryptocurrency analytics firm Santiment has published a comprehensive analysis of the decentralized finance protocol Aave and its AAVE token, detailing a significant governance crisis that led to substantial market volatility. The dispute between the Aave decentralized autonomous organization (DAO) and Aave Labs resulted in approximately $500 million in market value losses for AAVE.
The conflicts originated from disagreements over revenue sharing, governance structures, and brand rights. Allegations emerged that Aave Labs failed to transfer revenue from certain integrations to the DAO treasury, prompting strong backlash within the community. This led to a sharp increase in social media posts about AAVE beginning in mid-December 2025.
Despite the price decline, Santiment's report emphasized that the protocol's fundamentals remained robust. 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.
On-chain data revealed a significant shift around December 22nd. Large AAVE wallet holders initiated buying positions during the price drop, with the share of total AAVE supply held by the top 100 addresses increasing 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 Balance increases in wallets holding over one million dollars worth of AAVE suggested supply was being withdrawn from exchanges, potentially indicating a supply squeeze.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 governance tension culminated in a vote to transfer the Aave brand and intellectual property rights to DAO control. The vote's rejection demonstrated significant divisions within the community. Reports that founder Stani Kulechov purchased substantial amounts of AAVE prior to the dispute intensified the controversy, raising questions about decentralized decision-making processes despite no evidence of governance manipulation.
Market sentiment began shifting as Aave Labs signaled a potential policy reversal, announcing that revenue from activities outside the core protocol could be shared with AAVE token holders. This move received positive reception from the community. Santiment's sentiment analysis detected a significant increase in positive comments, with AAVE reaching its highest bull-to-bear commentary ratio since before the dispute began. Derivative market data also supported signs of recovery.
Santiment 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.
