The reason behind WLFI's sell-off of ETH: stop-loss or another scheme?

Author: 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 had previously splurged $210 million to acquire 67,498 ETH at an average price of $3,259, now facing a paper loss of up to $125 million. As a DeFi star project backed by the Trump family, WLFI's actions are puzzling: why sell at this critical moment? How much more ETH can be sold? Will there be further sell-offs in the future?

Difficult Choices in a Cold Market

Currently, the crypto market is shrouded in cold air, with ETH prices trembling between $1,465 and $1,503, more than halving from WLFI's purchase price. Looking back to early 2025, the optimism brought by Trump's inauguration led WLFI to significantly increase its ETH holdings, seemingly aiming to soar with favorable policies. Unfortunately, the good times didn't last long, as ETH's continued slump turned that enthusiasm into a massive paper 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 whale bought 4,677 ETH at $1,481, with the market engaged in a fierce tug-of-war. WLFI's choice to act at this moment may indicate they sensed a short-term bottom or were worried about further price declines. Regardless, this $8.01 million cash-out feels like selling an old coat in the winter—reluctant, but unavoidable.

Why Sell: Stop Loss or Other Plans?

Why did WLFI cut losses at this juncture? The answer may not be singular.

First, the logic of stop loss is evident. Selling 5,471 ETH at a loss of nearly $10 million is better than watching the remaining 62,027 ETH continue to depreciate. It's akin to cutting a "bad stock" in the market, preserving cash first. After all, if the entire position were liquidated at the current price, losses would approach $111 million—who could withstand that?

Second, the pressure of cash flow cannot be ignored. WLFI enjoyed a period of glory with $590 million from token sales, but expenses for operations, partnerships, and new projects won't stop. While $8.01 million isn't much, it can alleviate immediate cash flow issues during market lows. After all, a project backed by the Trump family can't afford to have an empty wallet, right?

Furthermore, this may be a trial for a strategic pivot. WLFI's asset pool includes not only ETH but also "veterans" like WBTC and TRX, as well as "newcomers" in the RWA space. Reducing ETH holdings to free up funds for partners like Ondo Finance or betting on Layer 2's potential could be a way to prepare for the future. After all, the DeFi stage is vast, and ETH is just one character in it.

Lastly, don't forget the external scrutiny. As the "favorite child" of the Trump family, WLFI carries a halo but also bears controversy. With 75% of profits going to the family and risks offloaded to token holders, this model has long raised suspicions. This sell-off could be under pressure from investors, proving they aren't just relying on "celebrity effect" for survival. The likelihood is low, but it's not without reason.

In summary, stop loss and liquidity are the most direct drivers, while strategic adjustments are potential undercurrents. As for external pressure, it may just be background noise in this drama.

How Much More Can Be Sold: Bottom Cards and Bottom Lines

After selling 5,471 ETH, WLFI still holds 62,027 ETH, worth approximately $90.9 million at current prices. How much more can this bottom card yield?

From a cash flow perspective, if each sale targets around $8 million, selling about 5,000 ETH would suffice, leaving a "safety line" of $56 million in holdings. However, if there are larger cash gaps, such as new project launches or debt maturities, selling 10,000 or more ETH isn't out of the question. But doing so would raise questions about ETH's core status.

Whether the market can absorb this is also crucial. This $8.01 million sell-off hasn't stirred much turbulence, as ETH's daily trading volume of $5 billion seems capable of digesting it. However, if WLFI were to dump tens of millions of dollars worth of ETH at once, panic could exacerbate the price drop. Cautiously, small-scale, phased sell-offs seem more in line with their style.

More importantly, there's a strategic bottom line. WLFI views ETH as a "strategic reserve"; if holdings fall below half (about 33.74 million ETH), its image as a DeFi leader could be shaken. Unless absolutely necessary, they likely won't easily deplete this card. In the short term, selling another 5,000 to 10,000 ETH (approximately $730,000 to $1.465 million) seems a reasonable guess, quenching thirst without causing too much harm.

Will They Continue to Sell?

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

First, watch the market's reaction. If ETH drops below $1,400 and paper losses rise by another $10 million or so, the impulse to sell may become overwhelming. However, if prices rebound to $1,800 and paper losses shrink to $90 million, they might tighten their pockets or even buy back some confidence. Currently, the support level at $1,450 and resistance at $1,600 serve as indicators.

Second, internal calculations are also critical. If WLFI still wants to play a leading role in the DeFi space, it can't afford to lose too much of ETH's status; sell-offs may gradually slow. However, if they target other trends, such as RWA or emerging tokens, ETH could become a "cash cow," accelerating the pace of reduction.

Third, external developments matter. The Trump administration's pro-crypto policies serve as a shield for WLFI; if a major move occurs in the second quarter and the market warms up, they might sit comfortably. But if the family gets embroiled in political turmoil or investors demand transparency, the pressure to cash out will be unavoidable.

In the short term (one to two months), small-scale sell-offs are quite likely, totaling between $10 million and $20 million. If the market remains sluggish, mid-term reductions could account for 30%-50% of remaining holdings, or $27 million to $45 million. In the long run, unless ETH makes a complete turnaround, WLFI may gradually fade from this territory, shifting its chips to new battlefields.

Changes in Ethereum's Fundamentals: Why Are Big Holders Turning Pessimistic?

Ethereum's fundamentals seem to be undergoing a quiet transformation in recent years, which may be a significant reason why large holders are turning pessimistic about ETH's prospects. Glassnode data shows that the number of active Ethereum addresses has stagnated over the past four years, hovering at the same level without significant growth alongside market booms. This is not a "efficiency range" 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 unexpectedly weakened its value capture ability. L2 significantly reduced the mainnet's Gas fees by diverting transaction volume (Gas fees dropped over 70% in March 2025), which, while user-friendly, has led to the value that was originally returned to ETH holders through the EIP-1559 burning mechanism being intercepted by L2, further compressing Ethereum's "profit space." Some analyses suggest that unless the mainnet can revitalize demand for block space through large-scale tokenization, Ethereum's long-term competitiveness may be at risk.

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

Jon Charbonneau, co-founder of crypto investment firm DBA, also stated that Ethereum's issuance model under the proof-of-stake (PoS) mechanism has fundamental trade-off issues, and adjustments are unlikely to resolve core contradictions. On the X platform, some users even remarked that Ethereum "has hardly changed since 2016," with slow upgrades and missed opportunities for rapid transformation, seemingly becoming a "victim" of its own success.

Meanwhile, the EigenLayer staking airdrop (Stakedrop) event has also disappointed the market; the narrative that should have boosted ETH holding yields through restaking has collapsed due to unfair distribution, further undermining the confidence of large holders. These signals collectively point to a reality: Ethereum's fundamentals are being eroded by internal and external factors, and the once-thriving growth engine is showing signs of fatigue, with large holders' pessimism perhaps being an intuitive response to this trend.

Conclusion

This sell-off event not only reveals WLFI's struggles in a market downturn but also reflects deeper dilemmas facing Ethereum. Stagnant growth in active addresses, value diversion from L2, and signals of institutional pessimism have cast a shadow over Ethereum's fundamentals, shaking the confidence of large holders. WLFI's next steps, whether continuing to sell or strategically pivoting, will unfold in the dual game of market and policy.

For investors, chasing the halo is undoubtedly tempting, but a calm judgment is needed: can Ethereum's future reignite vitality? Where will WLFI's gamble lead? Perhaps only time will reveal the answers.