I think you'd want to apply the alpha value of the sprite. You can do that by making the last line "COLOR = vec4(mix(...).rgb, texture(TEXTURE, UV).a)"
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Oof, I haven't touched shaders in Godot myself yet, besides a very simple section during one tutorial, so maybe I should not give any advice, but I think this can be solved by applying the shader to the pond and adding a check for transparency before applying the changes to the pixels.
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