[REPORT] bsdETH Quarterly Report Q1 2026

[ham]

This report aims to provide a comprehensive update of all bsdETH related activities over the last quarter, including both on-chain and off-chain data. The purpose of this report is to inform and educate the wider Reserve community on the activities of bsdETH becoming a reference library for all governance, social media and on-chain data.

Summary

• Q1 marked a stabilisation phase for bsdETH following the sharp deleveraging event observed in Q4 2025. While market cap declined 21.2% quarter-on-quarter, this largely reflected the 30.7% decline in ETH price rather than meaningful additional capital outflows.

• ETH supply recovered, increasing 21.5% from 1,212 ETH to 1,472 ETH, suggesting that the forced position unwinds observed in the previous quarter have largely run their course.

• DeFi supply remained negative, declining 35.4% quarter-on-quarter, though the pace of contraction slowed significantly compared with the ~90% drawdown observed in Q4.

• Morpho remained the primary distribution venue, with ETH-denominated supply broadly stabilising despite declines in USD denominated liquidity driven by ETH price weakness.

• Onchain activity showed early signs of recovery, with 90 day transfers increasing 42.8% following the sharp contraction observed in the previous quarter.

• Index DTF allocations continued to grow modestly, reaching 34 ETH by quarter end. While still small in absolute terms, index allocations may represent an important long-term distribution channel as index DTFs mature.

• Social media activity remained intentionally limited, as resources continued to prioritise governance execution, basket optimisations and ecosystem distribution work across the broader DTF landscape.

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Full Report

bsdETH Headline Metrics

Following the sharp contraction observed in Q4 2025, bsdETH entered Q1 2026 in a period of stabilisation rather than continued drawdown. Market cap declined a further 21.2% quarter-on-quarter, falling from $3.83m to $3.02m, largely reflecting the 30.7% decline in ETH price over the same period rather than meaningful additional capital outflows.

In contrast to the previous quarter, ETH supply increased by 21.5%, rising from 1,212 ETH to 1,472 ETH. This suggests that the majority of forced deleveraging observed following the Balancer exploit in Q4 has largely run its course, with supply beginning to gradually rebuild despite weaker dollar-denominated headline metrics.

RSR staking declined during the quarter, with staked RSR falling 36.0% from $352k to $225k. This appears primarily driven by the reduced scale of the bsdETH supply rather than declining confidence from stRSR participants. Staking yield remained relatively stable, increasing slightly from 3.30% to 3.40%.

Overall, Q1 represents a stabilisation phase for bsdETH. While market cap continued to decline alongside ETH price weakness, the recovery in ETH-denominated supply suggests early signs that the yield protocol is beginning to rebuild following the sharp deleveraging event observed in late 2025.

Current bsdETH Collateral Basket

Last Rebalanced: 03/03/2025

Token Holder and Transfer Metrics

Holder growth continued during Q1 with total holders increasing from 25,100 to 25,268 (+0.7%), indicating that wallet-level distribution of bsdETH continues to broaden gradually despite the contraction observed in the previous quarter.

Onchain activity also showed early signs of recovery. 90 day transfers increased by 42.8%, rising from 34,391 to 60,159. While still well below the level observed earlier in 2025, this increase suggests that transaction activity is beginning to stabilize following the sharp decline seen during the deleveraging period in Q4.

Total lifetime transfers also increased modestly by 2.1%, reaching 717,763 by the end of the quarter.

As noted in previous reports, holder counts alone should not be interpreted as a direct proxy for economic activity as they include wallets holding negligible balances. Transfer metrics therefore remain a more reliable indicator of active usage across DeFi venues and integrations. Taken together these metrics suggest that while activity remains below previous peaks, the sharp contraction in Q4 is beginning to stabilise.

DeFi Integrations

DeFi supply remained subdued during Q1. Total supply across DeFi markets declined 35.4% quarter-on-quarter, falling from $1.72m to $1.11m, though the pace of contraction slowed compared with the 89% decline observed in Q4.

Morpho continued to represent the primary venue for bsdETH distribution. Supply across Morpho markets declined 33.1% in USD terms and 4.6% in ETH terms, suggesting that while dollar denominated liquidity fell alongside ETH price weakness, ETH supply remained broadly stable during the quarter.

Liquidity across Aerodrome also declined during the quarter with supply falling 39.6% in USD terms and 13.9% in ETH terms. This reflects reduced liquidity provision following the deleveraging event observed in late 2025 rather than structural changes in the integration itself.

Supply to index DTFs remained relatively small but continued to grow modestly in ETH terms, increasing from 31 ETH to 34 ETH. While still limited in absolute size, index allocations represent an emerging distribution channel as larger index DTFs mature and seek diversified ETH exposure.

Overall Q1 reflects a transition from contraction toward stabilisation across DeFi venues. While total supply remains well below the highs observed earlier in 2025, the pace of withdrawals has slowed significantly suggesting the ecosystem is beginning to find a new equilibrium following the market wide deleveraging event.

Morpho Markets

Index DTFs

Aerodrome LP Pairs

Governance

Proposal 1 - Upgrade bsdETH to Release 4.2.0.

RFC

Total unique commenters - 1

Off-chain Poll - 3 votes (3 for / 0 against)

IP

Unique Voters - 2

For - 23m (182% quorum)
Against - 0

Social Media

This section looks at the data surrounding the bsdETH X account only

Activity on the bsdETH X account remained intentionally limited during Q1 with no posts published during the quarter, continuing the strategy adopted in Q4 to prioritise governance and distribution work across the broader ETH DTF ecosystem.

Despite the absence of new posts, the account maintained a stable follower base with total followers declining only marginally from 141 to 139 (-1.4%). This suggests that the lack of posting activity did not materially impact audience retention over the quarter.

Given the relative scale of bsdETH compared to ETHplus and the relatively weak traction of the bsdETH X account regular posting will remain paused. The decision to deprioritise social media activity reflects a deliberate allocation of resources while higher impact initiatives are pursued.

Implications for governance

The following points aim to translate Q1 data points into areas for further exploration, discussion, prioritisation and potential coordination across delegates, contributors, and ecosystem partners over the coming quarter.

Growth & Distribution

• Index DTF allocations, while small, continue to grow
  → May represent a structurally important distribution channel as index products scale
  → Raises the question of whether deeper alignment with index DTFs should be prioritised as a long-term sticky growth strategy
• Emerging structured products (e.g. Tulipa ETHplus) introduce alternative demand pathways
  → Should bsdETH explore similar integrations to attract more durable, non-leveraged capital? Or focus on strengthening existing DeFi-native distribution first?

DeFi Integrations & Liquidity

• DeFi supply contraction has slowed significantly, with ETH-denominated liquidity has stabilised on Morpho
  → Suggests current integrations remain functional but not yet in a growth phase
• Liquidity reductions across Aerodrome indicate LP capital has not yet returned post-deleveraging
  → Should incentives be considered to support liquidity recovery?
• Current distribution remains highly concentrated in a small number of venues
  → Raises the question of whether additional integrations should be pursued, or whether depth in existing venues should be prioritised

Governance & Participation

• Governance participation remains limited (low voter and commenter counts)
  → It’s likely that the new delegator programme will go a long way to fix this but how can we capitalise on their new / renewed participation in bsdETH governance?

Operations & Communication

• Social media activity remained paused during Q1 as resources were prioritised elsewhere
  → Raises the question of whether a lightweight, targeted communication strategy could support growth without significant resource overhead, another contributor is happy to take over from Ham or whether continued deprioritisation remains optimal.

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Conclusion

Q1 2026 marked a stabilisation period for bsdETH following the sharp deleveraging event observed in late 2025. While market cap and DeFi supply remained below previous highs, the recovery in ETH-denominated supply and early improvements in onchain activity suggest that the most severe phase of contraction has likely passed.

Looking ahead, the primary challenge for bsdETH remains rebuilding durable, non-leveraged demand. Strengthening distribution across composable DeFi integrations, index DTF allocations and potential new channels such as structured vaults or institutional partnerships will be key to restoring sustainable growth.

As in previous quarters, ETH supply remains the north star metric, and future expansion will likely depend on deeper integrations across the Reserve ecosystem and broader distribution across emerging ETH-native capital channels.

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Finally, if you’ve enjoyed this report and consider me, Ham, a valued steward of the bsdETH Yield DTF please consider delegating your voting power to me to ensure your voice is always represented in Reserve governance. You can find more information on my delegation platform.

TG: @hamdefi
Discord: Ham6869

[zeb]

Appreciate the update. To me it reads like: cautiously bullish. Which is not a bad way to start as a new governor.
With new signs of recovery, it sounds like it would the right moment to push for some BD to speed up this new traction?

@ham

• Activity on the bsdETH X account remained intentionally limited during Q1 with no posts published during the quarter, continuing the strategy adopted in Q4 to prioritise governance and distribution work across the broader ETH DTF ecosystem.

Given the relative scale of bsdETH compared to ETHplus and the relatively weak traction of the bsdETH X account

A bit of a chicken and egg problem also right? Less marketing will mean less scale. So if I may ask, what was the rationale (got a link handy? you probably remember it and can find it quicker than I ever would) and what has happened governance wise and distribution wise since?

Do view all my endless questions mainly as getting to know what has been done so far, I still need to get a view of what I am governing here.

The following points aim to translate Q1 data points into areas for further exploration, discussion, prioritisation and potential coordination across delegates, contributors, and ecosystem partners over the coming quarter.

Is this new due to my comments? Awesome!

@ham

Raises the question of whether deeper alignment with index DTFs should be prioritised as a long-term sticky growth strategy

Sounds very plausible to me!

@ham

Should bsdETH explore similar integrations to attract more durable, non-leveraged capital? Or focus on strengthening existing DeFi-native distribution first?

Really depends on what our resources are. Is it just us? Are there team members and BD involved?

• Liquidity reductions across Aerodrome indicate LP capital has not yet returned post-deleveraging
  → Should incentives be considered to support liquidity recovery?

Would incentives in this case be bribes to veAERO holders?

Current distribution remains highly concentrated in a small number of venues. Raises the question of whether additional integrations should be pursued, or whether depth in existing venues should be prioritised

As mentioned elsewhere, I would advocate that markets trend to dominance. Again, depending on how much resources we have as bsdETH, but my hunch is little, so would focus on growing the existing ones.

• Governance participation remains limited (low voter and commenter counts)
  → It’s likely that the new delegator programme will go a long way to fix this but how can we capitalise on their new / renewed participation in bsdETH governance?

I mean, it likely/hopefully will increase vote and commenter counts by 2 For me and @Sixty to participate beyond simple voting, we would need to know who else we coordinate with on planning. Or if it is just us. If it is just us, and I will speak for myself here, taking on a full BD role for $250 a month and no further upside is a very hard no.

Don’t want to end with that of course, I do hope there are more people already working on this DTF, and if so, I won’t mind sharing my thoughts and suggestions.

[ham]

Thanks for the reply @zeb, I’d agree with your cautiously bullish assessment.

Based ETH and the Yield protocol have now weathered two difficult quarters following the Balancer hack, the subsequent unwind of leveraged positions, and more recently the deliberate wind down of inefficient incentives as the protocol moves toward positive Net Annualised Recurring Revenue (NARR). One metric that stands out here is ETH supply. It fell 74% in Q4, but recovered 21% in Q1 despite incentives continuing to be reduced well into the quarter, as @nevin.freeman mentioned on the most recent community call. To me that suggests underlying demand is stabilising without the need for ongoing heavy incentives.

I appreciate you’re often timezone rugged for calls, but I would encourage listening to the recording when it’s posted. My takeaway from Nevin’s comments is that, given the weaker revenue profile of the Yield protocol vs the Index protocol, it’s unlikely we return to large-scale incentive programmes or the TVL levels they previously supported. This is particularly true for bsdETH, which does not yet include a protocol fee, although aligning it more closely with the ETHplus revenue model is something I plan to work on this quarter.

With regard to your comments on marketing and the bsdETH X account, there isn’t a formal rational posted on the forum. As champion of bsdETH this fell under my control when I took on the role, but but over time I made a deliberate decision to deprioritise it in favour of other work. If you look back at the Q4 report can you see a year of social media metrics which show we started with 147 and despite a semi-regular posting cadence for three of those quarters we’ve seen minimal engagement and ended the year with 141 followers.

I think at this point it’s also worth considering where we think the future direction of bsdETH lies. With reduced incentives and limited BD / ops bandwidth, I don’t think we’ll see meaningful expansion of DeFi-native strategies. Instead, bsdETH likely evolves into a B2B primitive, providing safer and diversified ETH yield to Index DTFs on Base, or acting as the underlying yield engine for ETH balances held on ecosystem-aligned platforms like UglyCash.

If we align on that direction, I think the question becomes whether increased social activity meaningfully drives TVL, or whether deeper integrations, for example supporting Index DTF curators like CF Benchmarks in reallocating ~$1m in WETH into bsdETH, offer a more scalable path. That said, I agree that a complete cessation is probably suboptimal, and a more targeted, institutional approach to comms is likely the right balance. Would value your thoughts here @starl3xx.

Regarding co-ordination, @griffpeer and @ivanhalen0x have been a huge help with shaping strategy and pushing internally, although as always they operate within their own mandates.

Appreciate the questions. Keen to hear how your suggestions evolve with this additional context, particularly around BD prioritisation, both from us and the core team, and where you think effort is best deployed given current constraints.

[Sixty]

Thank you for the super in-depth update @ham, this is especially helpful for newer delegates. Before I dive deeper with more concrete suggestions, I was curious about a few things:

1. Is there a dashboard that you use for the onchain metrics of bsdETH?
2. I was unable to find the bsdETH/eUSD market on Morpho, could you point me in the right direction?

Also, we do have some bandwidth to help with some regular social media activity on the bsdETH X account, happy to coordinate this with you.

[ham]

Thanks @Sixty.

1. There isn’t a dashboard. I gather these metrics from EtherScan, DeFiLlama etc. I’ve wanted to build a dashboard to support the data within these quarterly reports but haven’t yet had time to do so.

2. You can find the bsdETH/eUSD market here. The market has been depreciated since the data in this report was collected at the close of the quarter.

3. Appreciate you offering some of your bandwidth to support the social media activity. Want to reach out via TG to discuss? TG: @hamdefi

[zeb]

bsdETH likely evolves into a B2B primitive, providing safer and diversified ETH yield to Index DTFs on Base, or acting as the underlying yield engine for ETH balances held on ecosystem-aligned platforms like UglyCash.

With the recent rsETH drama, if our DTFs weather them well, which so far seems to be the case, it could be useful ammo for BD and social media.

[zeb]

@ham

Raises the question of whether deeper alignment with index DTFs should be prioritised as a long-term sticky growth strategy

Should bsdETH explore similar integrations to attract more durable, non-leveraged capital? Or focus on strengthening existing DeFi-native distribution first?

Let’s say we do. @ivanhalen0x @griffpeer Is this something you would pick up/continue then?

@zeb

• Liquidity reductions across Aerodrome indicate LP capital has not yet returned post-deleveraging
  → Should incentives be considered to support liquidity recovery?

Would incentives in this case be bribes to veAERO holders?

And if it indeed were bribes, those bribes do fatten APRs for veAERO holders to vote on pools, which then fatten the incentives for LPs to be there. But current prices mean bribes do not return their equivalent in AERO, which is also IMO one of the reasons the bribe market crashed. TVL did not crash along with bribes, nor did swap fees, so the whole bribe market its legitimacy is debatable.