Aave Price News: AAVE Gets Hit by Governance Clash – Is a Storm Coming?

Aave (AAVE) has gone down by nearly 11% in the past 24 hours and currently sits at $156 per token as a governance battle is raging.

Understanding how decentralized protocols work from a management perspective takes a bit of mental flexibility.

In the case of Aave and most other DeFi solutions, there’s a central entity that runs the front-end side of the protocol. In this case, that entity is Aave Labs, a company run by the creator of the solution, Stani Kulechov.

Meanwhile, the Aave DAO is a decentralized entity owned by the wallet addresses that hold $AAVE tokens.

Right now, there’s an ongoing debate on who owns what and the rights that these two entities have over certain Aave assets.

Aave Labs and Aave DAO Clash Over Fee Revenue Allocation

The whole discussion began with a change in the platform that provides fee revenues to Aave for token swaps. Aave Labs unilaterally decided to switch service providers and sign an agreement with CoWSwap.

Now, contrary to the traditional arrangement, this new deal would direct fee revenue to Aave Labs, and this creates a conflict of interest as top delegates from the Aave DAO believe that the funds should go to this decentralized entity, as they have always.

Now this is not pennies on the dollar. We are talking about a deal that could generate about $10 million per year for Aave Labs. Delegates and $AAVE holders believe that this revenue should go to the DAO to strengthen its treasury.

Stani Kulechov Official X Account – Source: X.com

Multiple proposals have been floated in the Aave decentralized governance platform including one to sue Aave Labs for misappropriating funds that belong to the DAO and another one, perhaps the most likely to be considered by the community, that involves transferring all of the Aave protocol’s assets (brand name, control over the user-facing interface, social media accounts, etc), to the DAO.

Whatever the outcome of this ongoing battle between two entities whose interests should be aligned could have a major impact on the price of AAVE at a point when the crypto market is in a fragile state.

This is bearish for the token and could have a severe impact on its short-term performance, especially if the two entities fail to reach some sort of middle ground.

AAVE Hits Key Support as Governance Battle Rages On – Will It Hold?

Looking at the daily chart, AAVE has once again touched a key area of support at around $155, from which it has bounced strongly multiple times in the past.

AAVE/USD Daily Chart (Coinbase) – Source: TradingView

Trading volumes today have spiked by nearly 310% as the token hit this mark once again. At $834 million, these volumes account for more than a third of the token’s circulating market cap, underscoring the strength of the buying/selling activity at this price level.

This increases its technical relevance and could result in a huge bounce if this turns out to be an area of strong buying pressure.

The last time this support area was hit, the price went on to recover by over 30%. That said, the latest events that have prompted this recent decline could catalyze the first break below $150 mid-November.

A price compression pattern called a symmetrical triangle has popped up as well, showcasing that the market has come to an agreement on the asset’s fair value for the time being. The outcome of this governance battle will likely determine the trajectory that AAVE will take moving forward.

A break below its trend line support could result in a move toward the October 10 lows of $127, while a breakout of the symmetrical triangle, which means a move above $190, could result in a reversion to the mean – in this case, the 200-day exponential moving average (EMA) at $236.