Restart AAVE Buybacks: Why the DAO Must Restore Confidence After a Damaging Seven Months
Since October 2025, Aave has gone through one of the most consequential stretches in its recent history. There have been real achievements: continued protocol development, cross-chain scale, institutional progress, the rollout of Aave V3.6, and the launch of Aave V4 on Ethereum. But those positives have been overshadowed by a sequence of governance conflicts, contributor fragmentation, the rsETH incident of 18 April 2026, public calls to withdraw funds, and finally the decision to pause AAVE buybacks at precisely the moment tokenholder confidence was already most fragile.
That pause should be reversed immediately .
This is not simply a question of short-term price support. It is a question of governance credibility, value accrual, and whether the Aave DAO is still willing to stand behind its own token at a time when confidence has clearly been impaired.
A timeline of what happened since October 2025
October 2025: resilience under stress, but V4 becomes the central story
In October 2025, Aave Labs published its monthly development update and reaffirmed that Aave V4 was the protocolâs primary development focus. Around the same time, Aave endured a sharp market stress event on 10 October 2025. Aave later reported that more than $250 million was liquidated that day and that the protocol processed $1.7 billion in stablecoin withdrawals while keeping roughly $700 million in USDC and USDT liquidity available.
This mattered because it reinforced the view that Aave remained technically resilient under pressure. For tokenholders, it suggested that the protocol foundation was still strong enough to support long-term value creation.
November 2025: continued development and security hardening
In November 2025, Aave Labs released another development update with V4 still at the center of execution priorities. Aaveâs security records also show multiple entries in mid-to-late November, indicating continued audits, contract work, and rollout preparation.
November was less dramatic publicly, but strategically important. It was part of the build-and-harden phase that should have set up a strong 2026.
December 2025: institutional momentum and cross-chain scale
In December, Aave Labs published its December 2025 update. Aaveâs year-end recap highlighted several major accomplishments. An Aave Labs subsidiary, Push Virtual Assets Ireland Limited, received MiCAR CASP authorization from the Central Bank of Ireland, opening the door to regulated stablecoin on- and off-ramps into the Aave App and future ecosystem applications. The same recap said Aave became the first protocol to reach $1 billion in TVL on six different networks: Ethereum, Arbitrum, Avalanche, Base, Plasma, and Linea.
Aave also stressed its institutional real-world-asset ambitions and pointed to the growth of Aave Horizon as part of the strategy going into 2026. By year-end, the message was clear: Aave was not just defending DeFi leadership, it was trying to expand into a larger and more regulated market structure.
January 2026: Aave V3.6 goes live
On 9 January 2026, Aaveâs changelog recorded the rollout of Aave V3.6, introducing Liquid eMode, improved collateral and borrowing configurations, renounce allowance functionality, and gas optimizations across multiple networks including Sonic, Optimism, Gnosis, Scroll, zkSync, Celo, Metis, Soneium, and Ethereum EtherFi markets.
That was an important reminder that even as the community anticipated V4, the live production system was still being improved. It showed real operational follow-through.
February 2026: V4 nears completion, governance conflict grows
By February, the technical side of the story was close to a major milestone. Aave Labsâ February 2026 development update remained centered on V4 progress. A separate V4 update stated that development was feature-complete, in final internal review, and undergoing layered audits, including formal verification and external reviews.
A launch roadmap was also published, outlining the remaining path to activation.
But February was also the point where governance tensions became impossible to ignore. Stani Kulechovâs post âHow AAVE will winâ argued that Aave was at a strategic crossroads and raised concerns about future growth trajectory and alignment.
At the same time, the proposed Revenue Alignment & Governance Integrity Framework sought to codify duties and alignment expectations for compensated actors within the Aave ecosystem. A February funding update proposed acquiring GHO, expanding supports for GHO liquidity, and creating operational allowances.
This was not just noise. The governance argument was about who controls value, how protocol-adjacent revenue should flow, and whether tokenholders can trust that Aaveâs economic engine is being managed in their interest. Those are existential questions for a governance token.
March 2026: Aave V4 launches, but tensions do not disappear
In March 2026, Aave V4 went live on Ethereum following governance approval. The same development update also highlighted the launch of Aave Pro. On paper, this should have been a defining victory for the protocol.
But the launch did not reset confidence. The ecosystem remained burdened by governance friction and unresolved disagreements about revenue alignment, contributor relationships, and strategic control. Major protocol milestones can create excitement, but they cannot fully offset a deteriorating trust environment.
April 2026: the rsETH incident turns a governance crisis into a confidence crisis
Then came the event that changed everything. On 18 April 2026, the Aave ecosystem was hit by the rsETH incident, which became one of the most damaging moments in the period. The incident triggered serious concern about protocol exposure, bad debt, and system safety, and it shifted the conversation from strategy and product to immediate risk management and accountability. The governance forum itself references the ârsETH incident â 2026-04-18â as a central topic in the aftermath.Aave Governance
What made the moment even more severe was the public communication around it. On 18 April 2026, Marc Zeller posted: âIf you have WETH on Aave V3 Core, withdraw now, ask questions later.â Whatever the immediate technical context, that statement became a defining symbol of the crisis. It was not routine commentary. It was a prominent Aave ecosystem figure effectively telling users to pull funds first and seek explanations later.
Once that happens, the damage is no longer only technical. It becomes reputational and reflexive. Users fear that insiders no longer trust the system enough to speak calmly, and tokenholders begin to price in a deeper governance and confidence failure.
The fallout: contributor fragmentation and a deteriorating token narrative
In the aftermath of the incident and the broader governance conflict, the protocolâs internal cohesion weakened further. The departures of key ecosystem contributors such as BGD Labs and Chaos Labs became part of the story investors and tokenholders had to process. These were not marginal names. BGD Labs was deeply associated with engineering, architecture, and governance implementation. Chaos Labs played a critical role in risk management and parameter design. When actors like these leave in a period of already elevated tension, markets do not view it as normal turnover. They view it as a signal of fractured trust and lower future execution certainty.
May 2026: the buyback pause compounds the damage
Against that background, the decision to pause AAVE buybacks was one of the most harmful possible signals to send to tokenholders. One governance commenter noted that the buybacks had been paused before the vote was even finished, adding to the perception that process discipline had broken down.ăgovernance.aave.com]([ARFC] Pause AAVE Buybacks - #12 by Jaymz13)
The same month brought another damaging market signal. On 16 May 2026, CryptoRank reported that Multicoin Capital moved roughly 286,000 AAVE, worth about $26.68 million, to Coinbase Prime in two tranches of 98,000 and 188,000 AAVE, a transfer widely interpreted by market participants as a potential precursor to sale or rebalancing activity.cryptorank.io Whether or not the entire position was immediately sold, the optics were poor: a major institutional holder appeared to be moving a very large AAVE position into an institutional trading and custody venue at a time when confidence was already badly impaired.
That matters because buybacks were not just a cosmetic program. They were one of the clearest remaining links between protocol-level success and tokenholder-level value accrual. At a time when the market had already absorbed an incident, governance conflict, contributor exits, public withdrawal warnings, and now a large institutional overhang, buybacks served as one of the few visible demonstrations that the DAO still believed AAVE was worth accumulating on behalf of holders.
Removing that support at the point of maximum fragility sends the opposite message. It tells the market that even the DAO is not prepared to defend the tokenâs value-accrual mechanism when confidence is weakest.
What the chart says about confidence
The chart reinforces this concern. AAVE is shown trading around 88.26 USDC, far below longer-term levels and well beneath the 99-period moving average near 136.43. The shorter moving averages, around 95.09 and 95.53, are also above spot, confirming continued weakness. Volume does not show decisive sustained accumulation, and OBV remains deeply negative, suggesting that the market has not moved into a clear accumulation phase.
In plain terms, the chart does not say that confidence has been restored. It says the opposite: AAVE remains in a prolonged downtrend, with only weak stabilization near the lows. In that environment, removing buybacks does not just reduce marginal demand. It damages the one remaining policy signal that directly tells holders the DAO still stands behind long-term token value.
Why restarting buybacks is necessary
Restarting buybacks is necessary for several reasons.
First, it would restore credibility to AAVEâs value-accrual framework. A governance token needs more than promises of future utility. It needs evidence that protocol revenues and treasury policy can ultimately benefit holders in a concrete way.
Second, it would help repair governance trust. If buybacks can be halted before governance process is fully complete, tokenholders are left wondering whether any economic commitment is truly durable. Re-enabling them would help re-establish that the DAO respects both process and prior tokenholder expectations.
Third, the current valuation context makes buybacks more, not less, rational. If the DAO believes Aave remains a leading protocol with long-term earnings power, buying AAVE at depressed levels is a stronger capital allocation signal than buying it only when sentiment is euphoric.
Fourth, buybacks provide a rules-based, non-discretionary source of demand that can counteract reflexive weakness. They do not guarantee a price recovery, but they do show consistent conviction and reduce the sense that the token has been abandoned.
Fifth, restarting buybacks would send a message that the post-incident pause was tactical and temporary, not a quiet retreat from tokenholder value. Without that clarification in action, the market may conclude that buybacks were always optional and can disappear whenever conditions become uncomfortable.
A call to action
Aave has survived difficult periods before, and the protocol still has the technical depth, brand recognition, and ecosystem relevance to recover. But recovery requires more than shipping code. It requires restoring belief.
Since October 2025, tokenholders have been asked to absorb a long list of shocks: market stress, governance conflict, contributor departures, the April 18 incident, public withdrawal warnings, and a worsening price structure. In that context, pausing buybacks was not a neutral treasury decision. It was interpreted as a statement about confidence.
The DAO should correct that signal.
AAVE buybacks should be restarted.
Not because buybacks alone fix every problem, and not because token price should override risk management, but because a governance token cannot preserve credibility if one of its clearest value-accrual mechanisms is withdrawn just when holders most need evidence that they are still part of the protocolâs long-term economic equation.
If Aave wants tokenholders to keep believing in the protocol, the DAO must show that it still believes in AAVE.