ETHplus Rebalance Q1 2026 - Step 1 Report
Executive Summary
The first step of the Q1 2026 ETHplus rebalance was completed successfully on 27th Jan 2026 with no interruption to yield distribution. Execution was completed safely, with only 15% of the backing buffer utilised and the buffer remaining above 100% throughout.
Step 1 has improved executional depth relative to the December basket. The interim basket now supports redemptions below the 0.5% slippage threshold up to 22,500 ETH, compared to approximately 5,250 ETH previously, while mint capacity below the same threshold remains above 50,000 ETH.
These improvements have been achieved without compromising yield or diversification. Blended yield remains unchanged at 2.61% and concentration risk has been reduced, with ETHplus’ share of total frxETH TVL falling from 9.19% to 6.56%.
Completing the second step of the rebalance is expected to extend redemption capacity below the 0.5% slippage threshold to approximately 30,000 ETH while maintaining yield and diversification profiles, furthering ETHplus into mandate compliance and providing significant headroom for further supply growth.
I now plan to liaise with ABC Labs on scheduling the second step of the rebalance. Their operational oversight is greatly appreciated in order to mitigate loss. Once timing is confirmed I will announce it here and on ETHplus socials. As always, feedback from governors is welcomed.
Full Report
The first step of the Q1 2026 rebalance was successfully completed on 27th Jan 2026. During execution, only 15% of the backing buffer was depleted. As the backing buffer was heavily overfilled, ~150%, prior to the rebalance, the rebalance did not drop the buffer below 100%. As a result, ETHplus holders and RSR stakers experienced no interruption in yield distribution, as any debt burdens to the buffer must be filled in with new appreciation before yield distributions can continue.
With the completion of the interim basket, we are already seeing material improvements in the executional depth of ETHplus. Mints now remain below the 0.5% slippage threshold beyond 50,000 ETH, while redemptions remain below the threshold until 22,500 ETH. This represents a clear improvement from the original basket, where redemption slippage crossed the threshold at approximately 5,250 ETH.
In parallel to optimisations to the ETHplus basket itself, gains have been seen in the liquidity profile of ETHplus previous liquidity bottleneck, rETH. Together, these factors have driven significant improvements in overall executional depth resulting in an interim basket which is more efficient than previous estimates, which suggested the threshold would be crossed at around 15,000 ETH.
Beyond execution, the interim rebalance has also achieved its objectives with respect to expected yield, diversification profile and concentration risk. In particular, the total percentage of frxETH TVL held by ETHplus has been reduced from 9.19% to 6.97%, closely aligned with the 6.56% level predicted prior to execution while yield and diversification profiles have remained constant.
Looking ahead, there remains a clear benefit to completing the second step of the Q1 rebalance, which will involve a further 5% reduction in rETH and sfrxETH and a 10% increase in weETH. Based on current estimates, completing this step would allow redemptions to remain below the 0.5% slippage threshold up to 30,000 ETH, while keeping the yield and diversification profiles constant. With ETHplus supply currently at approximately 35,000 ETH, this implies that around 85% of the total supply can be redeemed with minimal price impact. This also provides substantial headroom for growth, as ETHplus supply could expand to roughly 150,000 ETH, around $300m, before falling out of compliance with its mandate.
I now plan to liaise with ABC Labs on scheduling the second step of the rebalance. Their operational oversight is greatly appreciated in order to mitigate loss. Once timing is confirmed I will announce it here and on ETHplus socials. As always, feedback from governors is welcomed.