Bittensor Drama: Covenant AI Exits, TAO Tanks 15%

Welcome back to The Warmup.

Happy Friday to all the leverage traders learning they could actually just hold spot positions.

Here’s what we’re watching:

• Market Snapshot

• Bittensor Drama: Covenant AI Exits, TAO Tanks 15%

• ETH Channel Rejection

• Galaxy Stock Pops 11%

Market: Bitcoin, Ethereum, and Solana are leading the move higher, while equities are mixed and volatility is cooling off.

Bittensor Drama: Covenant AI Exits, TAO Tanks 15%

What’s going on:

Covenant AI, one of the biggest subnets on Bittensor, just pulled the plug and left the ecosystem.

The reason? According to founder Sam Dare, the whole “decentralization” pitch isn’t real. He claims the network is still effectively controlled by co-founder Jacob Steeves.

In his words, it’s “decentralization theatre.”

Dare says recent actions crossed the line. Emissions to Covenant’s subnet were cut, their moderation powers were removed, and parts of their infrastructure were deprecated.

On top of that, he alleges token sales were timed to apply economic pressure.

Covenant had been a major player, even building one of the largest decentralized AI training efforts in the space.

But despite that, they’re now walking away and planning to continue outside Bittensor.

The market reacted fast.

TAO dropped 15% in a matter of hours before seeing a slight bounce.

Meanwhile, Steeves didn’t directly address the accusations but hinted this could lead to a stronger system, including new “lock-based” subnet ownership.

What it means:

This is bigger than just one team leaving. It hits at the core narrative of Bittensor.

If key builders start questioning decentralization, confidence in the entire ecosystem takes a hit.

At the same time, this could be a turning point.

Either Bittensor proves it can evolve and decentralize further… or more cracks start to show.

ETH Channel Rejection

What’s going on:

ETH got rejected at the top of its rising channel and is now pulling back into a key decision zone around the 50-day EMA.

This level sits near the middle of the range, making it a key pivot for the next move.

Key levels we’re watching:

• Support: $2,150 → EMA + mid-range level

• Lower support: $2,000 → channel support

• Resistance: $2,300 → channel top

Directional Bias: Neutral (range-bound)

What we’re waiting for:

• Hold above $2,150 for potential longs

• Break below → short to $2,000

• Clear reaction at support before re-entering longs

Galaxy Stock Pops 11%

What’s going on:

Galaxy Digital just dropped its annual report… and the stock jumped 11%.

That’s despite posting a $241M net loss in 2025.

Here’s why: the core business is actually profitable.

Galaxy’s Digital Assets division (trading, lending, staking, asset management) generated $505M in adjusted gross profit.

That’s what investors are focusing on.

The losses mostly came from unrealized hits on crypto holdings, not the underlying business.

CEO Mike Novogratz is also leaning into a bigger bet: infrastructure.

Between crypto financial services and AI data centers like Helios, Galaxy is positioning for long-term, stable revenue.

What it means:

The market is starting to reward real businesses over pure narratives.

Galaxy isn’t just riding crypto cycles, it’s building the rails behind them while hopping on the AI train.

If they execute, this could turn into a much more durable owning the two biggest technologies (AI x Crypto).

• CryptoQuant says bitcoin, ether rally driven by new long positions in perpetual futures

• Binance's Changpeng Zhao claims U.S. crypto rivals 'paid millions' to block his pardon

• Bhutan moves $23M worth of bitcoin

Successful investing comes down to staying disciplined and not reacting emotionally to market swings.

Focus on long term trends rather than short term price movements, since real gains often take years to play out .

Avoid putting all your money into one asset, because overexposure increases risk and leads to poor decisions during volatility .

The investors who win are the ones who follow a consistent strategy, stay patient, and accept that investing always involves risk .

— The Warmup Team

Always do your own research. This newsletter is supplemental material to help educate readers as they make their own decisions. Projects mentioned here are provided to give a potential early-mover advantage.