TAO continues to fall as a major subnet operator exits the protocol | Credit: Hameem Sarwar
Share
Key Takeaways
TAO’s price dropped nearly 28% after a major $10M sell-off by Covenant AI.
Negative funding and lack of bullish participation show traders have lost conviction.
Unless key support holds, TAO could fall further, and any rebound is likely to be limited.
TAO, the governance token of the Bittensor network, has taken a sharp hit—dropping nearly 28% in a move that caught much of the market off guard.
The sell-off followed the sudden exit of Covenant AI, one of the network’s largest subnet operators, along with a sizable liquidation of its holdings.
But the price drop is only part of the story.
What happened after that exit could prove even more important than the sell-off itself.
Sponsored
Disclosure
We sometimes use affiliate links in our content, when clicking on those we might receive a commission at no extra cost to you. By using this website you agree to our terms and conditions and privacy policy.
Just weeks ago, TAO was riding one of its strongest narratives yet.
The network successfully supported the distributed training of Covenant-72B, a large-scale AI model that drove TAO to a 90% rally in March.
Now, that same ecosystem is facing one of its most serious tests.
Interestingly, Covenant AI had been a major participant in Bittensor’s ecosystem.
Its departure was not quiet. Reports indicate that roughly 37,000 TAO tokens (worth around $10 million) were sold into the market shortly after the exit.
In a market where liquidity is still developing, that kind of supply can create immediate pressure, and it did.
TAO’s price fell quickly as the market struggled to absorb the sell-off.
No More Belief From Traders
From an on-chain perspective, the funding rate has stayed consistently negative, reflecting strong bearish sentiment around the altcoin.
However, the relationship between price and funding is key here.
Earlier, during the late-March rally, funding flipped deeply negative while TAO’s price rose.
During that period, shorts were crowded and forced to cover, fueling upside volatility.
Notably, there is no clear spike in positive funding. This means longs are not aggressively chasing. Therefore, the market lacks bullish conviction at current levels.
If funding remains negative while prices stop falling, a squeeze setup could re-emerge. That would create conditions for a relief bounce.
But by the look of things, if TAO’s price continues lower with funding still negative, the trend simply extends.
No squeeze catalyst appears, which could drag the crypto below $220.
Timeline of the Exit and Market Reaction
The sequence of events shows how quickly the situation escalated:
April 10 (Morning): Sam Dare publishes an exit letter on X and Tao Papers, accusing co-founder Jacob Steeves of unilateral control and claiming emissions were cut off from Covenant’s subnets (SN3, SN39, SN81).
April 10 (Mid-day): Covenant AI liquidates approximately 37,000 TAO ($10.2 million), triggering an immediate 20%+ price drop and nearly $900 million in market cap loss within 12 hours.
April 12:Jacob Steeves responds, calling the move a “deep betrayal” and proposing a Locked Stake mechanism to prevent similar exits from destabilizing the network in the future.
April 13–15: TAO continues to decline as the market processes both the liquidity shock and the broader implications for governance and decentralization.
What Next for TAO’s Price?
From a technical perspective, TAO’s price has confirmed a failed bullish reversal, and the structure now tilts bearish again.
Initially, the price formed a clear cup-and-handle pattern. The rounded bottom was complete, and the handle developed just below the $300 resistance zone.
This typically signals bullish continuation. However, the breakout attempt failed, as TAO’s price was rejected near the 0.5 Fib level ($341).
More importantly, it broke back below the key $294 support (0.382 Fib). As a result, the breakout turns into a bull trap.
Meanwhile, momentum indicators shift decisively.
At the time of writing, the Relative Strength Index (RSI) has printed a bearish divergence at the highs.
This signals weakening momentum before the drop. Subsequently, the RSI could trend lower, confirming loss of strength.
At the same time, the Awesome Oscillator (AO) has flipped negative, signifying increasing short-term bearish momentum.
Notably, TAO’s price is now testing the 0.236 Fib near $258. This is a critical support zone.
Disclaimer:
The information provided in this article is for informational purposes only. It is not intended to be, nor should it be construed as, financial advice. We do not make any warranties regarding the completeness, reliability, or accuracy of this information. All investments involve risk, and past performance does not guarantee future results. We recommend consulting a financial advisor before making any investment decisions.
Victor Olanrewaju is a crypto analyst and reporter at CCN with deep roots in on-chain research and technical analysis. His crypto journey began in 2017, but it was the 2020 Uniswap airdrop that sparked a full-time pivot into the space.
With a foundation in copywriting, Victor honed his craft creating high-converting content for leading crypto brokers — most notably an XRP price prediction that ranked #1 on Google during the 2021 bull run.
He later joined AMBCrypto in 2022, where he combined storytelling with technical and on-chain analysis to cover key market narratives.
In 2024, he expanded his expertise at BeInCrypto, collaborating with analysts and using tools like Glassnode, Santiment, and IntoTheBlock to break down Bitcoin and altcoin trends.
At CCN, Victor covers the top cryptocurrencies, memecoins, macro shifts, blending real-time insights with deep-dive metrics.
He holds a Bachelor’s degree in Physics from the University of Ibadan, equipping him to simplify complex data for a wide audience. Follow his work or connect on LinkedIn or X.
