Ethereum’s decline unfolded progressively as macro pressure, leverage unwinds, and thinning liquidity weighed on price structure. As downside momentum accelerated, Ethereum slipped below the $1,980 threshold on February 21, 2026, compressing profitability across major holder groups. This breakdown did not occur in isolation; it followed sustained distribution, derivatives deleveraging, and reduced risk appetite across large balance sheets.
As prices weakened, unrealized losses spread across all whale cohorts, from 1,000–10,000 to 100,000+ ETH wallets. Spot now trades below the $2,075 mega-holder cost basis, confirming losses even among the largest addresses. Long-term holders hover near breakeven, while short-term cohorts remain deeply underwater near 0.5. Despite this pressure, on-chain positioning shows restrained sell behavior, with whales largely holding rather than distributing, suggesting strategic absorption.
Historically, such cohort-wide stress reflects conviction testing, where unrealized pain precedes accumulation-led bottom formation rather than a structural exit. Liquidity absorption trends continued to develop even as founder-linked wallets returned to distribution flows. This activity did not begin recently. A fortnight earlier, Vitalik had already conducted smaller ETH sales, forming a staggered disposal pattern rather than a single liquidation event.
The latest withdrawal of 3,500 ETH, worth approximately $6.95 million, from Aave reflects continuation, not sudden capitulation, and aligns with rising unrealized losses across whale cohorts. On-chain positioning shows limited aggressive distribution, suggesting cautious loss management rather than a panic exit, though founder sales can influence sentiment within a fragile market.
Downside expectations sharpened on Kalshi as Ethereum traded near $1,975. Market odds now price an 85% probability of breaching $1,750, while 49% anticipate a decline below $1,250. Deeper capitulation scenarios remain visible, with 30% odds assigned to sub-$1,000 levels. This pricing shift aligns with renewed founder-linked sales and ongoing whale liquidity adjustments.
As unrealized losses expand, sentiment weakens alongside treasury rebalancing flows. Yet historically, such fear-weighted probabilities have clustered near capitulation zones, where distressed distribution often precedes broader recovery stabilization.
Cohort-wide unrealized losses, restrained whale selling, and staggered founder distribution collectively reflect conviction testing rather than disorderly capitulation. Ethereum now hovers between late-stage bottom formation and extended cycle compression, with downside probabilities surging even as absorption persists.
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