TAO Drops 30% as Covenant AI Calls Bittensor a Decentralization Lie
Bittensor’s native token TAO fell as much as 30% between April 10 and 11, 2026, after Covenant AI publicly exited the network and accused co-founder Jacob Steeves of running what it called “decentralization theater.” The token slid from $337 to a low of $249, erasing over $650 million in market capitalization within hours. Daily trading volume exploded to $1.72 billion on April 10, roughly 3.4 times the $500 million average seen earlier in the month.
What Covenant AI Actually Said
Covenant AI operated three simultaneous subnets on Bittensor: SN3 (Templar), SN81 (Grail), and SN39 (Basilica). That is not peripheral participation. Running three active subnets requires sustained technical commitment, validator coordination, and ongoing research output. When the team announced its exit on April 8, and founder Sam Dare published his full account two days later, the market understood immediately what was being removed. Dare’s statement was direct: “The entire premise of Bittensor, the promise that drew builders, miners, validators, and investors into this ecosystem, is that no single entity controls it. That promise is a lie.” He alleged that Steeves suspended token emissions to Covenant’s subnets, revoked moderation rights over their own community channels, deprecated infrastructure without consent, and used large, visible token sales timed to coincide with operational disputes as a coercive tool.
Steeves rejected the core claims publicly, stating: “I do not have the ability to suspend emissions,” and adding that his token sales represented less than 1% of his total investment in Covenant-related subnets. He argued that the subnets in question were running on near-total burn code, which affected emissions through standard market mechanics rather than administrative override. The two accounts are irreconcilable on the facts. Given that Steeves did not address the broader structural allegation about effective control resting with a small group managing network upgrades, Dare’s account carries more credibility on the governance question specifically, even if the emissions claim remains disputed.
The departure was also messy on Covenant’s own terms. Dare reportedly sold 37,000 TAO worth of subnet alpha tokens across Templar, Grail, and Basilica before or alongside the public announcement, a move that CryptoSlate described as functionally providing exit liquidity at the expense of subnet holders. You can believe the governance critique is legitimate and still recognize that the execution was predatory. Both things are true.
Bitcoin BTC$62,551.00▲2.13%
Ethereum ETH$1,651.58▲0.75%
Tether USDT$0.9991▼0.03%
BNB BNB$595.75▲1.35%
USDC USDC$0.9997▲0.00%
XRP XRP$1.12▼0.70%
Solana SOL$65.13▲0.87%
TRON TRX$0.3224▲0.20%
Figure Heloc FIGR_HELOC$1.03▲0.02%
Dogecoin DOGE$0.0845▲0.28%Contagion Across Subnets and What Comes Next
The damage extended well beyond TAO itself. Grail collapsed 68%, Basilica dropped 62%, and Templar fell 57.5% within a single session. Subnets with no direct connection to Covenant, including Minotaur (down 34%) and TrajectoryRL (down 26.8%), were sold hard anyway. That is the psychology of ecosystem contagion: when a major actor exits loudly, every holder in the network starts asking who leaves next, and they sell before they have an answer. RSI on TAO briefly hit 16, deep in oversold territory, and the token has partially recovered, though it remains more than 12% lower on the week.
Technically, TAO is now trading in the 0.382 to 0.5 Fibonacci retracement zone. In November 2025, a break below this same range produced losses exceeding 30%. A further correction toward the $144 to $230 support band is a live scenario, not a tail risk. The broader macro backdrop is not helping either, with macro pressures already weighing on risk assets across the board. What happens to TAO from here depends on whether Bittensor can demonstrate that its governance is more than branding. Right now, the market has already voted on that question.
