Bittensor TAO Slides 20% After Governance Dispute Sparks Selloff

Key Insights:

• Bittensor’s TAO plunged over 20% after Covenant AI's exit raised governance concerns, triggering heavy selling pressure and rapid liquidation of leveraged positions.
• Consequently, market sentiment weakened quickly as accusations of centralized control surfaced, shaking confidence in Bittensor’s decentralized structure and long-term ecosystem stability.
• TAO now tests key support between $250 and $263, while recovery depends on regaining 280 resistance amid cautious buyer participation.

Bittensor’s TAO token dropped more than 20% to trade near $273 after a sudden shift in market sentiment disrupted its recent upward trend. The decline followed the exit of Covenant AI, a major subnet operator within the ecosystem. Hence, the event quickly moved beyond a routine departure and triggered deeper concerns among investors.

Covenant AI did not leave quietly, as it raised strong concerns about governance practices within Bittensor. It claimed that a small group influenced key decisions despite the project’s decentralization claims. Moreover, the accusations pointed to unilateral actions and unclear participation in subnet incentive changes.

Market Reacts to Loss of Confidence

These statements spread rapidly across trading circles and significantly altered sentiment within hours. Besides, the exit highlighted how dependent the network remains on active subnet participants. Consequently, traders began to price in risks tied to stability and long-term participation.

At the same time, Covenant AI liquidated a large share of its holdings, adding direct selling pressure. This move intensified the downturn as prices began to fall sharply. Additionally, many holders reacted quickly, while others faced forced exits due to leveraged exposure.

Liquidations Accelerate Decline

The price drop triggered a wave of long liquidations across the market. Falling prices forced leveraged traders out, which pushed the price even lower. Consequently, millions of dollars in positions disappeared, exposing how crowded bullish trades had become.

TAO had recently traded near the $340 range before reversing sharply. However, once selling pressure increased, the token broke through several support levels. Significantly, the drop below the 300 level removed a key psychological barrier for traders.

Current Zone Becomes Critical

The price has now moved toward the mid-260 range, where it attempts to stabilize. This area aligns with earlier retracement levels and short-term averages. However, buyers remain cautious, and confidence has not fully returned to the market.

The range between $250 and $263 has become the immediate support zone. If this level holds, consolidation could follow, allowing the market to rebuild momentum. Moreover, a move toward 280 dollars would signal early recovery strength.

Failure to hold above $250 could open the path toward $233. Consequently, traders continue to watch price action closely as uncertainty remains elevated.