Bittensor’s TAO cryptocurrency has experienced a sharp decline, plummeting nearly 25% after Covenant AI's unexpected exit from the project. This exit was accompanied by serious allegations against co-founder Jacob Steeves, who was accused of exerting excessive control over the project's governance. The situation escalated when Covenant's founder sold off a substantial amount of TAO—specifically, 37,000 tokens—causing widespread panic among investors and triggering a wave of liquidations.
This significant sell-off initiated a chain reaction that adversely affected the entire ecosystem:
- Validators suffered losses in their staked assets, which led to a decrease in consensus power.
- As a result, rewards for validators declined, weakening incentives for participation.
- Confidence in the project dwindled, prompting more users to exit the platform.
This series of events created a classic negative feedback loop, significantly undermining trust in the project.
In response to the turmoil, the Bittensor team has implemented updates, including the Teutonic-I framework and a new governance proposal (BIT-0011) aimed at preventing similar incidents in the future. Despite these efforts, analyst Michaël van de Poppe regards the situation as a significant stress test and delineates the crash into three potential recovery scenarios.
Scenario 1: Rapid Recovery Back to $300–$340
The first scenario envisions a quick bounce back. If the market stabilizes and governance reforms like BIT-0011 are approved, this event could soon be a distant memory. The analyst believes that confidence could return rapidly, especially given Bittensor's crucial role in the intersection of AI and cryptocurrency. He assigns this scenario a 45% probability, which could increase to 60% if the proposed changes are successfully implemented.
Scenario 2: Prolonged Stagnation Between $200–$260
The second scenario anticipates a slow sideways movement for TAO. If uncertainty continues to prevail, buyers might struggle to absorb ongoing outflows from the market, leading to a gradual rebuilding of trust. This scenario carries a 40% probability.
Scenario 3: Further Decline Toward $180
The worst-case scenario suggests a deeper drop towards $180. This outcome would depend on further negative developments, such as additional subnets exiting the project, accelerating outflows, and failures in governance improvements. The analyst considers this scenario unlikely, assigning it only a 10–15% probability unless a broader market downturn triggers a domino effect.
Price Outlook
Regarding the price trajectory, the analyst notes that TAO has dropped from a peak of $350 to around $250, currently hovering near $253. He characterizes this movement as a sharp yet manageable correction rather than a catastrophic collapse. The ability of TAO to maintain these levels indicates that the market may already be stabilizing.
Investment Strategy and Future Perspective
Despite the volatility, the analyst maintains his position and is not planning to sell any of his TAO holdings. He has expressed openness to increasing his investment if TAO's price approaches the $200–$210 range, considering the broader market context and potential improvements. He emphasizes that the AI-driven cryptocurrency space is still in its early stages, and such moments of turbulence can serve to reset and fortify the system, ultimately paving the way for future growth.
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Source:Coinpedia Fintech News News