This is highly related to MC-133524, but they are not caused by the same thing.
When the water is flowing to somewhere else, it will be displayed lower than normal, but the game still use the regular edge case (-1.74 blocks beneath the water surface
as claimed in this comment by @unknown in MC-133524) to tell whether the eye level of player is under water or not, which makes MC-133524 much more noticeable when the player is standing beneath a flowing water source.
Reproduce Steps
1. Set up a 3×3 pool.
2. Place a water source one block higher of the center of the pool.
3. Fly into the water source, use /tp @s ~ x.26 ~ 0 0
to tweak your position.
4. ❌ Find that the sky is rendered blue.
5. ❌ Use F5 and F3+B to find that your eyes have a long distance from the water surface.
Related issues
is duplicated by
relates to
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Comments

Can confirm in 20w51a.
Can confirm in 21w03a.

Can confirm in 1.17.1. Also affects lava.
Can confirm in 1.20.2 and 23w42a.
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