The Bittensor network faces significant scrutiny after one of its largest subnets, Covenant AI, announced its exit. Covenant AI accused the network’s leadership of “centralized control with decentralized branding,” claiming key decisions are influenced by a single authority. This departure has triggered a sharp sell-off, with the TAO token losing nearly 25% of its value over 72 hours, erasing earlier bullish momentum driven by strong quarterly performance and institutional interest.
The AI-driven momentum across cryptocurrency reflects an expanding shift toward decentralized infrastructure. However, recent uncertainty around Bittensor appears to be more than just sentiment-driven fear, uncertainty, and doubt. For context, Covenant AI, one of the largest and most active subnets on the network, recently announced its exit.
In a post on X, the team argued that Bittensor no longer functions as a truly decentralized network. They stated that network leadership suspended subnet emissions, removed community control, and applied economic pressure, suggesting centralized control operates behind a decentralization narrative. The team clarified, “We cannot raise capital, attract talent, or ask our community to commit resources on top of a foundation that one person can undermine at will.”
This raises a key question about whether the concern reflects deeper structural issues. From a technical standpoint, the AI token sector has shown significantly stronger expansion than broader markets like Bitcoin. According to CoinMarketCap data, the combined market cap of AI-related tokens climbed nearly 13% recently, while trading volume surged close to 70%.
TAO’s quarterly performance reinforced this trend, rallying nearly 40% while Bitcoin declined. Following Covenant AI’s exit, TAO extended intraday losses by 13.3%, bringing total losses to nearly 25% within 72 hours. Much of the earlier bullish momentum, including a $43 million Q1 revenue narrative and Grayscale ETF filing optimism, has been largely unwound.
According to market analysis, this makes TAO’s weakness appear less like a short-term shakeout and more like a structural concern. The recent drawdown could mark the beginning of a deeper downside trend for the token.
