Bittensor’s $TAO plunges to $265 after Covenant AI exits key subnets

Bittensor’s $TAO fell sharply to around $265 after Covenant AI abruptly left three major subnets (3, 39, and 81). The departure created technical and leadership gaps, raising concerns about network stability and decentralization in the decentralized AI sector. Covenant AI had operated the high-performing subnets that support large-model AI development and serve as protocol benchmarks. Without Covenant AI’s specialized nodes, community miners reorganized quickly to keep the subnets running, but uncertainty increased around Bittensor’s resilience and competitiveness. A governance dispute also surfaced. Covenant AI alleged centralization risks, including claims tied to emission suspensions and token-sale scheduling that Covenant AI said conflicted with the protocol’s permissionless principles. The volatility showed up in highly visible $TAO price swings, though the token stabilized near $265. Bittensor co-founder Jacob Steeves issued a personal apology to $TAO holders, acknowledging financial and emotional damage. Steeves rejected centralization accusations and framed the situation as an unavoidable trust risk in permissionless systems after a break with Samuel Dare, a key figure from Covenant AI. To address the exposed vulnerability, Steeves proposed a “Locked Stake” protocol upgrade. Subnet owners would lock $TAO for a predetermined period to better align accountability with long-term staked commitment. The community plans to discuss the Locked Stake proposal on Bittensor Discord. For traders, the episode is a reminder that $TAO can react quickly to governance and operator changes, creating short-term downside risk while the market awaits clearer alignment mechanisms.