Covenant AI Exit Sends Bittensor’s TAO Down 30%

Covenant AI announced a full exit from the Bittensor network on Friday and accused the project of centralization. The announcement coincided with an approximately 30% decline in the TAO token, which traded near $249 after the selloff.

Covenant AI had been one of Bittensor’s largest subnet operators. In a Friday post, the team described the network as a “decentralized theater” and said the protocol was not genuinely open to fair competition among subnets. The statement directly challenged Bittensor’s stated model of an open AI network where independent operators compete to earn TAO.

Trading volume rose about 250% during the selloff, indicating heightened market participation. Futures markets recorded roughly $11.8 million in liquidations, with about $9.71 million of those liquidations coming from long positions.

Technical setups seen by analysts projected further downside. A pattern involving the 20-day and 200-day exponential moving averages produced a projected target near $200, which implies roughly 25% additional downside from the post-announcement level.

TAO was trading inside a 0.382–0.5 Fibonacci retracement zone on daily charts. If the pattern repeats, the token could first test the 0.618 Fibonacci support near $230 and, if that level breaks, move toward a full retracement at the 1.0 Fib level near $144, about 45% below current prices.

Previous price action showed similar structures. A November 2025 breakdown from the same retracement range preceded a drop of more than 30% to the 1.0 Fib level, while a June 2025 episode saw TAO fall below the consolidation range before stabilizing near the 0.618 level and later recovering.

Bittensor did not issue an immediate public response to Covenant AI’s post. Market participants cited the exit and the centralization claim when focusing on short-term price levels, volume and liquidation metrics to assess the depth of the selloff and likely recovery points.