AAVE fell as low as $85 on Tuesday before partially recovering to trade near $88, extending a selloff that has now erased roughly 75% of the token's value since its August 2025 high near $356.

The latest drop came as DeFi selling accelerated across the board, but AAVE has been underperforming the broader market for months amid an escalating governance crisis that has cost the protocol three prominent independent contributors.

Chaos Labs announced Monday that it is proactively terminating its engagement with the protocol, citing a fundamental disagreement over how risk should be managed and inadequate funding to cover expanded responsibilities under Aave V4.

Aave founder Stani Kulechov thanked the firm for its contributions but pushed back on several aspects of Chaos' account.

Chaos Labs' exit follows BGD Labs' departure on April 1, citing what it called an increasingly centralized dynamic around Aave Labs and V4 development. Marc Zeller of the Aave Chan Initiative (ACI) called it "the most significant talent loss in Aave's history."

And Zeller's own organization followed suit. In early March, ACI announced it would wind down its engagement with the DAO, citing structural breakdowns in governance.

Governance Dispute

It all started in December, when a governance dispute erupted after a delegate discovered that Aave Labs had been redirecting approximately $200,000 per week in interface fees — previously flowing to the DAO — to itself via a CowSwap integration.

The controversy escalated into a broader confrontation over tokenholder rights, brand ownership, and the balance of power between the DAO and Aave Labs. BGD Labs co-founder Ernesto Boado proposed a token alignment initiative to shift control toward the DAO, which Kulechov publicly opposed, saying it would "slow down and potentially derail" the protocol's momentum. The proposal was ultimately voted down, with the token dropping roughly 20% over the course of the dispute.

In February, Aave Labs submitted its "Aave Will Win" framework, requesting up to $51 million in funding from the DAO in exchange for routing 100% of product revenue to the treasury. The proposal narrowly passed its Temp Check, though Zeller's post-mortem analysis argued the broader delegate base had actually leaned against it when excluding Aave Labs–linked voting power.

The community turmoil has created a striking divergence between Aave's protocol metrics and its token performance. The protocol remains DeFi's largest lender with over $24 billion in total value locked (TVL), and generated $124 million in net revenue in 2025, up 72% from 2024, according to DeFiLlama.

Yet at roughly $88, AAVE is trading 86% below its May 2021 all-time high of $666 and roughly 75% below the $356 level it reached in August 2025. The token is also underperforming the broader crypto market — down about 10% over the past seven days while Bitcoin and Ether are up, according to CoinGecko.

This article was written with the assistance of AI workflows. All our stories are curated, edited and fact-checked by a human.