TAO selloff: Covenant AI exits amid “decentralization theater” claims, targets -25% to -45%

Bittensor’s TAO faces a potential 25%–45% further downside after Covenant AI, a top Bittensor subnet operator, announced its full exit from the ecosystem. Covenant AI accused Bittensor of being centralized, challenging the network’s core “open AI competing subnets” pitch and triggering a market repricing. TAO is already down about 30% from its weekly high (around $249). The Friday selloff came with a sharp momentum surge: trading volume rose roughly 250%, suggesting broad trader agreement with the bearish thesis. In the derivatives market, approximately $11.83M in positions were liquidated, with $9.71M coming from long traders—evidence of forced selling and deteriorating sentiment. Technical analysis reinforces the downside case. After TAO confirmed a “golden cross” (20-day EMA crossing above 200-day EMA), Cointelegraph noted earlier that TAO was pointing to a bearish target near $200, implying roughly another 25% decline from current levels. Additional “fractal” signals suggest TAO is consolidating inside the 0.382–0.5 Fibonacci retracement band, which historically acted as a short-term pause during prior macro-top corrections. If the pattern repeats, analysts expect a move toward the 1.0 Fib retracement near $144 (about 45% below current levels).