Aave tumbles following rumors regarding World Liberty token allocation

The price of the Aave (AAVE) token tumbled by over 8% on Saturday, following rumors that the decentralized finance (DeFi) protocol would receive a different token allocation from World Liberty Financial (WLFI), a DeFi platform backed by members of US president Donald Trump’s family.

“The WLFI team told WuBlockchain that the claim that ‘Aave will receive 7% of the total WLFI token supply’ is false and fake news,” blockchain reporter Colin Wu said, sparking a debate about the rumor and the token arrangement on social media.

Wu was referencing a WLFI community proposal from October 2024, outlining an arrangement in which the Aave decentralized autonomous organization (DAO), responsible for governing the protocol, would receive 7% of the WLFI governance token’s circulating supply and 20% of protocol revenues generated by the WLFI deployment on Aave v3.

Aave token price falls following rumors. Source: TradingView

Aave founder Stani Kulechov called the proposal “the art of the deal” on Saturday, and, in a separate post, signaled the terms of the proposal were still valid. Following the rumors, Aave’s token fell from about $385 to a low of $339 before rebounding to about $352.

Cointelegraph reached out to World Liberty Financial and Aave spokespeople but did not receive a response by the time of publication.

Rumors regarding the arrangement between Aave and World Liberty come amid a renewed interest in DeFi and growing institutional involvement in the crypto niche.

Related: $70B DeFi protocol Aave goes live on Aptos in ecosystem expansion

DeFi sector is on the rise as institutions take notice

The total value locked (TVL) in DeFi protocols is currently over $167 billion, according to DeFiLlama, and is approaching the all-time high of over $212 billion from December 2021.

DeFi TVL rose sharply following the results of the 2024 US elections in anticipation of a friendlier regulatory climate for cryptocurrencies in the country.

DeFi TVL rose sharply following the 2024 elections in the United States. Source: DeFiLlama

Institutional investors, including banks, asset managers, corporations, and financial services companies, have become increasingly involved in crypto and DeFi, shaping many of the narratives during the current market cycle.

This involvement has fueled a debate among the crypto community about encroaching government regulations on permissionless protocols and the potential capture of DeFi by traditional financial institutions.

Magazine: How Ethereum treasury companies could spark ‘DeFi Summer 2.0’

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