Ethereum’s Transformative Phase: An Analytical Perspective
Ethereum is currently experiencing a pivotal transition, arguably the most consequential since its peak in August 2023. The cryptocurrency has undergone a pronounced correction, with its value plummeting by over 35% since October 6. This sharp downturn has elicited a crisis of confidence within speculative segments of the market, precipitating a series of liquidations that underscore the volatility inherent in this asset class.
However, the narrative surrounding Ethereum is not one of mere collapse; rather, it encapsulates a substantial rebalancing of control over the ETH supply. Empirical data indicates a classic deleveraging event converging with a structural accumulation trend. This dynamic manifests as long-term holders divesting their assets while leveraged traders face liquidation pressures, consequently ushering in a new class of institutional treasuries that exhibit indifference to short-term market fluctuations, steadily absorbing ETH from circulation.
Divestitures by Long-Term Holders Amidst Leverage Unwinding
For the first time since early 2021, Ethereum’s long-term investor base is engaging in significant distribution activities. According to analytics from Glassnode, holders who have maintained their investments for a duration of 3 to 10 years have increased their realized expenditures to over 45,000 ETH per day, as measured by a 90-day moving average—a level not observed since February 2021.
This cohort comprises some of the earliest and most successful ETH investors. Their heightened selling activity does not denote panic; rather, it reflects strategic profit-taking amid heightened volatility. A salient example includes an Ethereum ICO participant who, after more than ten years of inactivity, transferred 200 ETH valued at approximately $626,000 on November 17. This particular wallet originally invested a mere $310 during the 2014 ICO to acquire 1,000 ETH, translating into a current worth exceeding $3.13 million—an astonishing return of 10,097 times the initial investment.
Concurrently, this phenomenon of “old money” liquidation is exacerbated by the catastrophic unwinding of leveraged positions within the market. For context, notable trader Machi was liquidated multiple times amidst declining prices, culminating in total trading losses exceeding $18.9 million. In an illustrative display of market volatility, Machi promptly re-established a long position on 3,075 ETH (valued at approximately $9.6 million) with a liquidation threshold perilously close to the prevailing market price—demonstrating the chaotic nature of speculative trading practices.
Moreover, significant liquidations have also been recorded among other high-profile traders such as Arthur Hayes. Notably alarming was the incident involving an entity dubbed the “66,000 ETH borrowed whale.” According to Onchain Lens reports, this entity faced acute pressure on its high-leverage Aave V3 position as prices declined sharply, compelling it to withdraw approximately 199,720 ETH (valued at around $632 million) to avert forced liquidation. The whale subsequently transferred over 44,000 ETH to Binance to close its position, incurring estimated losses exceeding $70 million—a stark illustration of risk management failures amidst extreme market conditions.
Institutional Accumulation: A Counterpoint to Retail Withdrawal
The contrasting aspect of this redistribution narrative is characterized by the emergence of institutional-grade buyers who are methodically constructing substantial ETH treasuries. Unlike speculative traders, these buyers are primarily accumulators with long-term strategic objectives.
BitMine, a digital asset treasury firm led by market strategist Tom Lee, has significantly expanded its holdings to encompass 3.5 million ETH—equivalent to approximately 2.9% of the total supply—moving closer to its objective of acquiring 5% of all circulating ETH. BitMine operates not as a hedge fund capitalizing on market cycles but as an Ethereum-denominated corporate treasury focused on accumulation and staking strategies designed to transform passive assets into long-term yield-generating instruments.
Similarly, SharpLink has adopted a parallel strategy, now holding approximately 859,400 ETH (valued at $2.74 billion) and accruing over 7,067 ETH in staking rewards since mid-2025. Collectively, BitMine and SharpLink command control over more than 4.35 million ETH—a programmatic accumulation that effectively removes this supply from the volatile liquid market and anchors it within staking contracts.
This methodical institutional accumulation starkly contrasts with a wave of retail-driven exits from the cryptocurrency market. Recent data from SoSo Value indicates that spot Ethereum exchange-traded funds (ETFs) are poised for their most significant monthly outflow on record, with withdrawals exceeding $1.2 billion this month alone.
The resulting liquidity landscape is characterized by chaos and disorder: ETF investors—typically more reactive to price fluctuations—are divesting in response to fear-driven stimuli; leveraged traders are experiencing forced liquidations; while long-term holders are realizing profits across multiple cycles—providing the very supply that institutional treasuries are strategically absorbing for future utility.
The Supercycle Thesis: A Future-Oriented Outlook
Tom Lee posits that the current turmoil constitutes an essential phase in what he terms an emerging “supercycle” for Ethereum—a notion paralleling his previous insights regarding Bitcoin’s trajectory when he first recommended it to Fundstrat clients in 2017 at approximately $1,000.
Lee articulates: “We believe ETH is embarking on that same Supercycle… To have gained from Bitcoin’s 100x run required enduring existential moments; thus current crypto prices may simply be discounting a massive future.” This anticipated future rests upon Ethereum’s established role as a pivotal settlement layer within the global economy.
The bullish narrative advanced by firms like BitMine and SharpLink centers around Ethereum’s unique positioning; it remains the sole blockchain where all major crypto economies converge for settlement purposes. The entire ecosystem encompasses stablecoins, Layer 2 scaling solutions (L2s), perpetual derivatives markets, real-world assets (RWAs), and institutional custody inflows—all contributing to sustained demand for ETH.
Lee perceives sharp retracements not as indicators of structural deficiencies but rather as characteristics emblematic of an asset in transition—from speculative fervor toward macroeconomic relevance.
In summation, analysis reveals that Ethereum is undergoing a large-scale restructuring post-Merge—not merely reflecting a simple drawdown but rather signifying a redistribution event wherein supply transitions from short-term reactive hands into those that are long-term and structurally committed.
