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VADODARA, December 31, 2025 — Da Hongfei and Erik Zhang, co-founders of the Layer 1 blockchain Neo (NEO), are engaged in a public dispute over the project's financial controls and governance structure, according to a report by Wu Blockchain. This latest crypto news exposes critical vulnerabilities in Neo's operational framework as the broader cryptocurrency market grapples with extreme fear sentiment, with Bitcoin trading at $88,593 and the Fear & Greed Index at 21/100.
Internal conflicts among blockchain project founders are not unprecedented, but their timing during periods of market stress amplifies systemic risks. The current dispute mirrors governance failures observed in projects like Terra (LUNA) in 2022, where centralized control precipitated catastrophic collapses. Market structure suggests that when foundational teams fracture, liquidity often evaporates from associated assets, creating Fair Value Gaps (FVGs) that predatory traders exploit. This event occurs against a backdrop where other altcoins face delistings and regulatory scrutiny, as seen in recent moves by exchanges like Bybit to remove tokens amid deteriorating sentiment. Related developments include exchange delistings during extreme fear and strategic accumulation by institutional players, highlighting a bifurcated market response to volatility.
According to the report, Da Hongfei alleges that Erik Zhang controls the majority of Neo's funds and consensus node voting rights. Da claims to have repeatedly urged Zhang to transfer personally managed NEO and GAS tokens to the Neo Foundation's multi-signature address, but Zhang has allegedly delayed this action with various excuses. In response, Zhang has criticized Da for failing to disclose the Neo Foundation's financial status, demanding a full, verifiable report. Da has committed to releasing this report in Q1 2026. Additionally, Zhang noted that Da is scheduled to step down from Neo mainnet-related work on January 1, 2026, to focus on subsidiary projects NeoX and SpoonOS. This public airing of grievances, sourced from Wu Blockchain, indicates a deep-seated rift in Neo's leadership.
Neo's price action has historically been sensitive to governance news, with previous disputes leading to sharp declines. Current charts show NEO testing a critical support level at $12.50, which aligns with the 0.618 Fibonacci retracement from its 2024 high. The Relative Strength Index (RSI) sits at 38, indicating oversold conditions but not yet extreme. Volume profile analysis reveals thin liquidity below $11.80, suggesting a potential liquidity grab if this level breaks. The 50-day moving average at $14.20 acts as immediate resistance. Bullish invalidation is set at $11.80; a breach would likely trigger stop-loss cascades. Bearish invalidation rests at $15.00, where a breakout could signal short covering. This technical setup mirrors broader market anxiety, as detailed in analyses of other altcoin sectors.
| Metric | Value |
|---|---|
| Bitcoin Price | $88,593 |
| Fear & Greed Index | 21/100 (Extreme Fear) |
| Neo (NEO) Support Level | $12.50 |
| Neo RSI | 38 |
| Da Hongfei Step-Down Date | Jan 1, 2026 |
For institutional investors, this dispute highlights governance risks in Layer 1 networks beyond technical metrics. Centralized control of funds and voting rights contradicts decentralized ethos, potentially affecting Neo's compliance with frameworks like the Howey Test. Retail holders face immediate price volatility and uncertainty around token utility. The conflict may delay upgrades or integrations, reducing Neo's competitiveness against chains like Ethereum, which recently implemented EIP-4844 to enhance scalability. Market data indicates that such internal strife often precedes capital outflows, as seen in historical analogs where founder disputes led to 30-50% drawdowns in token value within weeks.
On-chain data indicates mixed reactions. Some analysts on X/Twitter argue this transparency could strengthen Neo long-term by forcing accountability, while others warn of a "governance gamma squeeze" where conflicting signals amplify selling pressure. A prominent trader noted, "When founders fight, liquidity dries up—classic order block breakdown." Sentiment aligns with the extreme fear gripping the market, where negative news catalyzes disproportionate sell-offs. This environment is reflected in regulatory developments that underscore the need for robust governance in crypto.
Bullish Case: If the financial report in Q1 2026 shows transparency and funds are moved to multi-sig addresses, Neo could rebound to $16.00. This scenario requires Bitcoin holding above $85,000 and the dispute resolving without further public escalation. Historical patterns suggest that resolved governance issues sometimes lead to relief rallies of 20-30%.
Bearish Case: If the conflict intensifies or funds remain controlled unilaterally, NEO could break $11.80 support, targeting $9.50. This would represent a 40% decline from current levels, exacerbated by broader market fear. Invalidating the bullish scenario would involve a sustained drop below $11.80 on high volume.
Source Note: Market data and factual reporting in this article are sourced from original reports. Commentary and analysis provided by CoinMarketBuzz.
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