Bittensor TAO dropped 27% after Covenant AI announced its exit, citing founder control and governance issues. Here’s what happened.
Bittensor’s TAO token took a sharp hit this week.
The cryptocurrency fell nearly 27% in 12 hours, wiping close to $900 million from its market cap. Trading volume surged to over $1.6 billion in 24 hours. Around $9 million in TAO long positions were liquidated during the crash.
The sell-off traced back to a major project departure and serious allegations against the protocol’s founder.
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Covenant AI Exits Bittensor, Triggering the TAO Sell-Off
Crypto analyst Ash Crypto flagged the development on X, linking the crash directly to Covenant AI.
The project, which operated subnets SN3, SN81, and SN39 on the Bittensor network, announced it was walking away. According to Ash Crypto, Covenant AI reportedly sold 37,000 TAO tokens worth over $10 million before leaving.
The team behind Covenant AI did not exit quietly. They publicly accused Bittensor co-founder Const of operating what they called “decentralized theatre.”
They claimed he retained unilateral control over critical parts of the protocol. These accusations moved fast across crypto social media and rattled investor confidence almost immediately.
TAO Founder Responds to Governance Accusations
Const, the Bittensor co-founder, addressed each accusation directly on X.
He denied having any special ability to suspend subnet emissions. Moreover, he explained that he sold some of his alpha holdings on Covenant’s subnets, which were not running and were operating on near 100% burn code.
He stated his actions followed the same mechanics any TAO holder would trigger through buying or selling.
On the governance accusations, Const pushed back firmly. He said Covenant’s founder, Samuel, had deprecated his own channels through a pinned comment and a post on X.
Regarding moderation, Const acknowledged he temporarily stopped Samuel from deleting criticism from users in his own channel, then later restored those rights.
He described his token sales as less than 1% of what he had invested in Covenant’s team, noting that visibility in his position is unavoidable.
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Traders Flag Suspicious Sell Volume Before the News
Beyond the public dispute, trader Ardi raised concerns about the timing of the crash.
He noted on X that sell volume had hit its highest point since December 2024, a full 24 hours before the TAO news became public. Besides, he suggested that larger wallets had used the pre-news price strength to exit millions in positions before retail traders knew anything.
TAO distribution spike confirmed pre-news breakdown setup, Source| Ardi/XArdi’s observation pointed to what many in crypto circles call information asymmetry.
Retail holders absorbed the selling pressure on the way up. When the news dropped and prices were already 20% lower, smaller investors were left scrambling for the exit.
Per CoinGecko data at press time, TAO was trading at $267.58, reflecting an 18.67% drop over 24 hours and a 12.64% decline over the past week.
Source: https://www.livebitcoinnews.com/why-is-bittensor-tao-price-dumping/
