Bittensor native token TAO has sharply corrected after a rapid rally, with price action signaling rising downside risk following the exit of a major ecosystem player. The token is now trading near 263 after losing more than 18 percent in 24 hours, raising concerns about whether further losses toward 250 or lower are imminent.
Covenant AI Exit Raises Centralization Concerns
The latest selloff was triggered by the departure of Covenant AI, one of the largest operators within the Bittensor ecosystem. The firm, led by Sam Dare, controlled several high emission subnets including SN3, SN81, and SN39.
Dare accused Jacob Steeves of maintaining centralized control over governance and network operations. According to Covenant AI, decisions around emissions, subnet status, and moderation rights were made unilaterally, undermining the project’s decentralization narrative.
The exit was further amplified by Dare liquidating more than 37000 TAO tokens, adding significant selling pressure. This move effectively removed a major liquidity provider and confidence anchor within the ecosystem.
TAO Price Action Signals Weak Momentum
TAO price has now dropped from a recent high near 341 to a low around 262, erasing a large portion of its previous rally. The correction follows a strong bullish phase where the token had gained over 100 percent.
Technical indicators suggest weakening momentum:
• Price has fallen below the 200 day moving average, a key long term support level
• The next critical support sits near 250 aligned with the 50 day moving average
• Relative Strength Index has declined to 41 indicating bearish momentum building
The breakdown below major moving averages increases the probability of further downside, particularly if market sentiment continues to deteriorate.
Derivatives Market Shows Mixed Sentiment
Data from derivatives markets reflects uncertainty among traders. Futures open interest has slightly declined to around 392 million, indicating some unwinding of positions.
However, the picture is not entirely bearish:
• Significant open interest declines are seen on exchanges like OKX, Gate, Bitget, Hyperliquid, and LBank
• Major platforms such as Binance and Bybit have not yet recorded a sharp drop in positioning
This divergence suggests that while some traders are exiting, others are holding positions, possibly expecting stabilization or a rebound.
Macro Catalysts and AI Narrative Still Intact
Despite the current controversy, the broader AI narrative around Bittensor remains a key long term driver. The project previously gained attention after decentralized training of a large scale model, supported indirectly by industry figures like Jensen Huang of Nvidia and Jack Clark of Anthropic.
This narrative fueled the earlier rally, highlighting the potential of decentralized AI infrastructure. However, governance concerns now pose a risk to investor confidence.
Outlook for TAO Price
In the near term, TAO remains vulnerable to further downside as technical weakness aligns with negative sentiment. A sustained move below 250 could open the door toward deeper corrections.
At the same time, if buyers defend key support levels and confidence stabilizes, the token could consolidate before its next major move. The coming days will be critical in determining whether this is a temporary shakeout or the start of a broader trend reversal.
