TAO Drops 20% as Covenant AI Exits Bittensor Network

• TAO dropped from $340 to $267, representing a 20% price drop in 24 hours.
• The price drop came after Covenant AI confirmed its exit from Bittensor.
• A 37,000 TAO token dump across key subnets intensified selling pressure.

Bittensor’s native token, TAO, dropped sharply after Covenant AI confirmed it is leaving the network. The announcement hit markets immediately, with TAO falling nearly 20% as confidence broke.

Price moved from around $340 to a low near $286, then bounced slightly toward $291. However, at the time of writing, the token trades at a much lower price of $267. The drop came with heavy volume, confirming forced selling and panic exits.

On the other hand, Covenant AI accused Bittensor co-founder Jacob Steeves of exercising centralized control over the network.

Governance Breakdown Goes Public

Covenant AI laid out specific actions behind its exit. It claimed emissions to its subnets were suspended, moderation control over its own community was removed, and its infrastructure was deprecated without consensus.

The team also alleged that token sales were used as pressure during the conflict. The core accusation was that Bittensor is not decentralized. 

Covenant AI stated that a single actor could override decisions, control upgrades, and influence economic outcomes. It pointed to a three-person multisig structure that, according to them, still operates under the effective control of one individual.

This directly contradicts Bittensor’s core narrative of permissionless and decentralized AI training.

Also, Covenant AI’s founder faced backlash for dumping 37,000 TAO worth of subnet alpha tokens across Grail, Basilica, and Templar. This added immediate selling pressure during an already fragile moment.

The move wiped out positions held by followers and investors tied to those subnets. Market participants widely interpreted this as forced-exit liquidity at best and intentional value extraction at worst.

Key Role of Covenant AI

The reaction was strong because Covenant AI was not a minor participant. The team built Covenant-72B, a 72 billion parameter model trained across more than 70 contributors using commodity hardware. It stands as one of the largest decentralized LLM training runs to date.

The project had drawn industry attention, including recognition from Nvidia leadership and references from Anthropic executives. It also contributed to a prior 90% rally in the Bittensor ecosystem.

Technical Breakdown and Key Levels

The chart shows that TAO was rejected near the 0.786 Fibonacci level around $456 and continued lower. The recent crash pushed TAO back below the 0.382 level near $295, which is now acting as resistance.

Immediate support sits near $237 (0.236 level). A break below this opens the path toward the $144 base, which marks the previous cycle low zone.

Meanwhile, reclaiming $295 is the first requirement for stabilization. Above that, $380-$390 becomes the next resistance range. A full trend reversal would require a move back above $456, which currently looks unlikely without a major narrative transition.

Related: Bittensor Price Prediction: TAO Reclaims $300 As “Bitcoin of AI” Narrative Builds