Bittensor TAO Drops 18% as Covenant AI Exit Sparks Panic

Key Insights

• TAO plunged over 18% within hours as Covenant AI exited Bittensor, triggering heavy selling and increased trading activity across major exchanges.
• Covenant AI accused network leadership of centralized control, alleging unilateral decisions that impacted subnet operations and governance participation within Bittensor.
• Technical indicators weaken as TAO falls below key averages, while derivatives data reflect mixed sentiment and growing uncertainty among market participants.

Bittensor’s TAO token fell more than 18% within hours on April 10, wiping out gains from its recent rally. The token traded near $263 after touching a high above $340 earlier in the day.

Besides the sharp price move, trading volume surged by over 150% as traders rushed to secure profits. The rapid shift reflected a strong reaction to internal developments within the network.

Covenant AI Announces Exit From Bittensor

Covenant AI confirmed its departure from Bittensor, marking a major shift in the network’s ecosystem. The firm controlled several high-emission subnets, including SN3, SN81, and SN39.

However, founder Sam Dare cited concerns about governance and control, describing the system as lacking true decentralization. He stated that key decisions came from a single authority rather than a distributed process.

Dare accused Bittensor leadership of taking unilateral actions that affected Covenant AI operations. He claimed the network suspended emissions tied to its subnets and removed moderation control from its channels.

Moreover, he alleged that subnet deprecation and token sales took place without consensus, raising concerns among participants. These claims intensified debate around governance within the protocol.

Large Token Sale Adds Market Pressure

Significantly, Dare liquidated all subnet-linked holdings, including more than 37,000 TAO tokens. This move added immediate selling pressure to an already volatile market environment.

Hence, the liquidation contributed to the rapid decline as liquidity increased across exchanges. Market participants reacted quickly, amplifying the downward movement within a short timeframe.

Technical Indicators Signal Weak Momentum

TAO’s price slipped below its 200-day moving average after a strong rally in recent weeks. Analysts noted that the asset now approaches the 50-day moving average near $250.

Additionally, the Relative Strength Index dropped to around 41, suggesting weakening momentum. This shift indicates that sellers currently hold control as the market searches for support levels.

Data from derivatives markets showed uneven positioning across major exchanges. Open interest fell slightly to about $392 million, reflecting reduced exposure among traders.

However, some platforms recorded sharper declines in futures activity, while others remained stable. This mixed trend suggests uncertainty rather than a clear directional consensus among participants.

Recent Rally Adds Context to Current Drop

TAO had recently surged more than 100%, driven by growing interest in decentralized AI networks. Comments from industry leaders further supported optimism around the project.

Consequently, the sudden reversal highlights how quickly sentiment can shift when internal conflicts emerge. The latest developments now place focus on governance stability and future network direction.