Behind WLFI's ETH Sell-off: Stop Loss or Something Else?

Written by: Luke, Mars Finance

On April 9, 2025, a wallet suspected to be linked to World Liberty Financial (WLFI) sold 5,471 ETH at an average price of $1,465, cashing out approximately $8.01 million. This is not a small matter — this wallet previously splurged $210 million, accumulating 67,498 ETH at an average price of $3,259, and now shows an unrealized loss of $125 million. As a DeFi star project backed by the Trump family, WLFI's actions are puzzling: why sell off at this critical juncture? How much more ETH can be sold? Will there be further sell-offs in the future?

Difficult Choices in the Market's Cold Wind

Currently, the crypto market seems to be shrouded in cold air, with ETH prices trembling between $1,465 and $1,503, more than halving from WLFI's buying price. Looking back to early 2025, the optimism brought by Trump's inauguration made WLFI significantly increase its holdings in ETH, as if it were going to soar with the favorable policy wind. Unfortunately, the good times didn't last long, as ETH's continued slump turned this enthusiasm into a massive floating loss of $125 million. From $89 million in March to now $125 million, the loss snowball keeps growing.

The timing of the sell-off is intriguing. On the same day, a giant whale bought 4,677 ETH at $1,481, and the market was in full swing. WLFI chose to make a move at this time, perhaps because it smelled the breath of a short-term bottom, or it was worried that the price would continue to fall. In any case, the cashing out of 8.01 million is like selling an old coat in the cold winter - reluctant, but there is no way.

Why sell: stop-loss or other plans?

Why is WLFI cutting losses at this node? The answer may be more than one.

First of all, the logic of stop-loss is obvious. Selling 5,471 ETH at a loss of nearly ten million after each coin drops to 1,794 USD is far better than watching the remaining 62,027 coins continue to depreciate. It's like cutting off a "dead stock" in the stock market, prioritizing cash preservation. After all, if the entire position is liquidated at the current price, the loss would approach 111 million. Who can bear that?

Secondly, the pressure of cash flow cannot be ignored. WLFI enjoyed a brief period of glory thanks to the sale of 590 million tokens, but operating expenses, collaborations, and new projects will not cease. 8.01 million may not be a lot, but it can alleviate urgent needs during market downturns. Just think about it, a project backed by the Trump family cannot be left with empty pockets, right?

Moreover, this may be a trial run for a strategic pivot. The asset pool of WLFI includes not only ETH but also veterans like WBTC and TRX, as well as newcomers in the RWA field. Reducing holdings in ETH to free up funds for partners like Ondo Finance, or betting on the potential of Layer 2, is not without its foresight. After all, the DeFi stage is large enough, and ETH is just one of the roles.

Finally, don't forget the external scrutiny. As the "favorite son" of the Trump family, WLFI is under a spotlight but also carries controversy. In the white paper, 75% of the profits go to the family, while the risks are placed on the token holders, which has long raised questions about the model. This sell-off, could it be under pressure from investors to prove that they are not just relying on the "celebrity effect" for success? The likelihood is small, but it is not without reason.

Overall, stop-loss and liquidity are the most direct driving forces, while strategic adjustments are potential foreshadowing. As for external pressures, they may just be the background noise of this performance.

How much more can be sold: trump cards and bottom lines

After selling 5,471, WLFI still holds 62,027 ETH, worth about 90.9 million at current prices. How much more can this trump card pull out?

From the perspective of funding needs, if each sell-off targets around 8 million in cash flow, then selling about 5,000 pieces would be sufficient, leaving a remaining "safety line" of 56 million in holdings. However, if there is a larger funding gap, such as the launch of new projects or debt maturity, selling one or two thousand pieces is also possible. However, this would raise a question mark about ETH's core position.

Whether the market can catch up is also the key. The sell-off of 8.01 million did not make much waves, and the volume of 5 billion daily trading volume of ETH seems to be still digestible. But if WLFI dumps tens of millions of dollars in one go, panic could make the price worse. To be cautious, small sell-offs in batches are more in their style.

More importantly, it is the strategic bottom line. ETH is regarded by WLFI as a "strategic reserve"; if the holdings drop below half (approximately 33.74 million), its image as a DeFi leader is likely to be shaken. Unless absolutely necessary, they probably will not easily exhaust this card. In the short term, throwing out another 5,000 to 10,000 (approximately 730,000 to 1,465,000) is a reasonable guess, quenching the thirst without causing significant harm.

Will it continue to sell?

In the future, will WLFI continue to reduce its holdings? The answer lies in three clues.

First, pay attention to the market's mood. If ETH drops below $1,400 and losses increase by another ten to twenty million, the impulse to sell might be hard to resist. However, if the price rebounds to $1,800 and losses shrink to $90 million, they might hold on tightly to their wallets and even buy back some confidence. Currently, the support level at $1,450 and the resistance level at $1,600 serve as indicators.

Secondly, internal calculations are also crucial. If WLFI still wants to play a leading role in the DeFi space, the position of ETH cannot be lost too badly, and the sell-off may gradually slow down. However, if they target other hotspots, such as RWA or emerging tokens, ETH may become a "cash cow," and the pace of reduction will accelerate.

Third, external winds and grass movements. The Trump administration's pro-crypto policy is a talisman for WLFI. If a major move takes place in the second quarter and the market rebounds, they may sit comfortably. However, if the family gets involved in political turmoil or investors demand transparency, the pressure to cash out will be unavoidable.

In a short period (one to two months), there is a considerable possibility of a small-scale sell-off, with a total amount potentially between 10 million and 20 million. If the market remains sluggish, mid-term reductions could account for 30%-50% of the remaining holdings, which is 27 million to 45 million. In the long run, unless ETH makes a complete turnaround, WLFI may gradually fade out of this territory and shift its chips to a new battlefield.

Ethereum's fundamental changes: Why are large holders becoming pessimistic?

The fundamentals of Ethereum seem to be undergoing a quiet transformation in recent years, which may be a significant reason why large holders have turned pessimistic about the prospects of ETH. Data from Glassnode shows that over the past four years, the number of active addresses on Ethereum has remained nearly stagnant, consistently hovering around the same level without significant growth alongside market booms. This is not a "efficiency zone" of technical optimization, but rather a sign of exhausted growth momentum, indicating Ethereum's fatigue in attracting new users and developers.

At the same time, the rise of Layer 2 (L2) solutions was supposed to bring new vitality to Ethereum, but it unexpectedly weakened its value capture ability. L2 significantly reduced the Gas fees of the mainnet by diverting transaction volume (Gas fees dropped over 70% in March 2025), which, while user-friendly, allowed L2 to intercept the value that was originally meant to be returned to ETH holders through the EIP-1559 burning mechanism, further compressing Ethereum's "profit margin". Some analyses point out that unless the mainnet can revitalize demand for block space through large-scale tokenization and other means, Ethereum's long-term competitiveness may be at risk.

The views of institutions also reflect this concern. CoinShares pointed out in a report that the frequent adjustments to the Ethereum protocol economy (such as the Dencun hard fork) have brought uncertainty, hindering institutional investors from building reliable valuation models, thereby weakening its attractiveness. In March 2025, Standard Chartered lowered its price target for Ethereum in 2025 to $4,000, citing its structural decline.

Jon Charbonneau, co-founder of the crypto investment firm DBA, also stated that there are fundamental trade-off issues with Ethereum's issuance model under the Proof of Stake (PoS) mechanism, and that adjustments are difficult to resolve the core contradictions. On platform X, some users even bluntly said that Ethereum "has basically remained unchanged since 2016", with slow upgrades and missing the window for rapid transformation, effectively becoming a "victim" of its own success.

At the same time, the Stakedrop event for EigenLayer has disappointed the market; the narrative that was supposed to boost ETH holding returns through Restaking has collapsed due to unfair distribution, further undermining the confidence of large holders. These signals collectively point to a reality: the fundamentals of Ethereum are being eroded by internal and external factors, and the once robust growth engine is showing signs of fatigue. The pessimism among large holders may be an intuitive response to this trend.

Summary

This sell-off event not only revealed WLFI's struggle in the market downturn but also reflected a deeper dilemma for Ethereum. The stagnation in active address growth, the value of L2 diversion, and the cumulative signals of institutional pessimism have cast a shadow over Ethereum's fundamentals, shaking the confidence of large holders. WLFI's next step, whether to continue selling or to strategically pivot, will unfold in the dual game of market and policy.

For investors, chasing the spotlight is certainly tempting, but a calm assessment is more necessary: can Ethereum's future be revitalized? Where will the gamble on WLFI lead? The answer may only be revealed by time.