Should You Sell or Buy $TAO After Bittensor's Biggest Stress Test?

One of the biggest questions after the largest stress test for the #Bittensor ecosystem.

• Did the most important subnet leave? Or did the entire subnet leave, or was it just a malicious actor who took away millions of dollars and exited the ecosystem?
• The price dropped from $350 to $250.
• Government trust has fallen, so indirect effects are impacting the ecosystem. Right now, I’m holding a large amount of $TAO in my portfolio. Big question: what is the plan, and what does the recent correction mean? Events
• Covenant AI publicly announced that they are leaving the $TAO ecosystem because they have questioned TAO governance. In addition, the founder sold 37,000 TAO on the open market, causing a major chain reaction.
• –> Readers of the largest subnet’s announcement will panic sell their positions.
• –> Leveraged buy orders are being halted or forced out of positions. --> Causing further negative impacts.
• Negative feedback toward the $TAO ecosystem due to continued TAO withdrawals is reinforcing the downtrend.

1. Covenant sells off 37,000 TAO --> price drops.
2. Other stakers see the price drop --> they withdraw to protect their positions.
3. Withdrawals are executed through their AMM, which makes conversions worse during the panic event, causing many other stakers to withdraw.
4. Validators see their TAO holdings decrease and their consensus power fall.
5. Rewards are decreasing.
6. Lower rewards, higher risk means reducing your position --> creating a negative spiral.

• Const responded to Covenant’s post and public statements about the events to clarify everything from the $TAO perspective.
• Teutonic-I launched -> a new version of Templar with the goal of building a model to reach the 1T parameter. They tested a 1 billion model.
• BIT-0011 proposal -> introduces “Stake Lock and Trust.” A new mechanism to increase trust, earn alpha points for your subnet, and eliminate the risk that the subnet founder can sell their position and thereby harm all holders in the community. Mechanism:
• You lock your alpha tokens on a subnet for a chosen period of time.
• Lock time is decided by the user --> the score starts at 100% and gets lower the closer you are to the expiration date.
• Every 30 days, a new trust score is issued.
• The staker with the highest trust score will be the subnet owner.
• You cannot withdraw the locked tokens as long as trust still exists. A strong proposal, and all these events happened within 72 hours of the actual event. Of course, it’s unclear whether this proposal will be approved in this form, but open discussion and debate help shape a better system. That’s the positive side of a decentralized ecosystem --> a stress test happens --> the model is redesigned --> and deployed until the next stress test happens. That’s how new technology moves forward. The Price of $TAO In the meantime, the price has fallen from $350 to $250 , and I think there are several reasons for this, which I also mentioned in previous posts.
• A founder selling 37,000 TAO affects the price of TAO.
• This impact triggers trade-based events --> liquidations, trading halts, etc.
• Trust is lost for a moment, so the event itself creates some chain reactions when some token holders want to withdraw, or when holders no longer have confidence. This is where the market needs to find balance. On the day the crash happened, the price dropped to $250. Today, it’s $253. To be fair, that’s not a bad performance for such a major stress test across the entire ecosystem. So what is my Scenario? I have three main scenarios, and I’ll explain this a bit. The main point is that we’re still at the forefront in the big story of Artificial Intelligence <> Cryptocurrency, so it’s unfortunate to see this happening to the protocol. However, this could also create a great opportunity to recover the price as quickly as possible. The recent collapse was a 1.5 sigma drop—not too bad, but still significant. Scenario 1 - V-shape recovery to $300-340 If the price holds steady over the next week and new proposals are approved, I think this event will pass, and momentum will return to the protocol. A bullish market could be beneficial, because theoretically, you can talk about the opportunity to accumulate one of the largest protocols within the AI crypto framework—especially when the subnet networks themselves can reach multi-million-dollar valuations. Additionally, the valuation of $TAO compared to OpenAI or Anthropic is still very low, but once one of the subnets draws attention, rapid growth is expected. I estimate this scenario has about a 45% probability. If BIT-0011 is approved, this could rise to 60%. Scenario 2 - Price stabilizes at $200-260 The second plausible scenario is that if proposals are not approved—or if the ecosystem shows no signs of improvement after a stress test like this—or if outflows remain significant, then theoretically, you could expect the price to keep falling. In that scenario: the number of new buyers interested at this price ( or the validators ) < outflows from the ecosystem, and that’s a bad sign. This could last for a period of X, but it shouldn’t be too long to regain growth momentum. On the other hand, rebuilding trust is a long-term process, so it may take time to restore it; therefore the chance of price stability is high. I estimate this scenario has about a ~40% probability. Scenario 3 - Testing at $180 level and continuing to decline This can only happen if a strong domino effect occurs under the following assumptions:
• Many subnets are leaving
• Strong outflows are flowing out of the ecosystem
• No approvals for new protocol proposals I don’t think this is likely, so perhaps its impact would only be around 10-15%. Altcoin Portfolio and Positions Based on my analysis and arguments, I don’t see any clear reason to jump in and buy more coins at this point. I already hold a strong position in this coin. I will continue to hold this position, but I will monitor the news and discussions within the ecosystem. If it drops further due to macroeconomic events, not internal events—for example down to $200-210 and the protocol approves protocol changes—then I’m willing to add more capital. Also, I don’t want to sell, because the upside/downside asymmetry is too large. If this is a moment like ETH after DAO, then there’s no reason to sell, because the ecosystem will only become stronger and stronger. I’m holding and watching. #CreatorpadVN