[REPORT] ETHplus Liquidity Analysis - April 2026

[ham]

This report aims to be a comprehensive analysis of ETHplus liquidity and the liquidity of its constituent collaterals. The purpose of this report is to inform and educate the wider Reserve community, key stakeholders and institutional capital allocators on key liquidity metrics and support governance activities over the next quarter. As per the ETHplus Methodology document these analyses are completed every quarter the series becoming a reference library for key liquidity metrics and how they have changed over time.

Summary

• Redemption liquidity has deteriorated QoQ across most assets in the ETH LST class, with basket-level slippage now breaching the 0.5% threshold at ~5,000 ETH, down from ~30,000 ETH post-rebalance
• Minting conditions remain strong, with slippage below ~0.5% across the full test range
• Liquidity dispersion has increased, with ETHx redemption depth falling from ~4,000 ETH to sub-1,000 ETH while OETH now exhibits the strongest exit liquidity profile in the test set
• The February 2026 rebalance improved diversification to 0.68 and initially extended redemption capacity, driven by the 22% weETH allocation, but these gains were not sustained
• ETHx has emerged as the primary constraint on basket-level liquidity, creating a bottleneck despite its relatively small 8% allocation
• ETHplus’ share of frxETH TVL has increased to ~6.9%, up from ~4.6% in February, moving closer to the mandated 10% dependency limit
• Basket yield has declined to 2.55%, with holder yield at 2.29% following the protocol take rate increase from 5% to 10%, now below the 2.46% stETH benchmark
• Secondary market liquidity remains shallow, with exit slippage reaching 4.9% at 1,500 ETH and >30% at 2,500 ETH, reinforcing protocol mint and redeem as the primary execution pathway

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Full Report

Collateral Asset Liquidity

December 2025

April 2026

A continued QoQ deterioration in redemption liquidity is now evident across most assets in the test set, while minting conditions remain broadly robust. This divergence is clearly visible in the April 2026 curves, where redemption depth has compressed across multiple collateral assets, with liquidity exhausting earlier in the tested range, while minting curves continue to show minimal slippage across similar sizes. The impact is now extending beyond smaller assets and beginning to affect core basket constituents, most notably weETH, where liquidity exhaustion occurs at approximately 5,000 ETH, down from 9,000 ETH in December, alongside a more pronounced redemption curve for stETH within the tested range.

On the minting side, conditions remain robust across all collateral assets. As shown in the April mint curves, slippage remains well contained across the full 0–10,000 ETH range, with most assets remaining below ~0.5% even at larger sizes. frxETH is the only partial outlier, continuing to exhibit higher slippage at smaller sizes, though this impact plateaus quickly and does not impair mint efficiency at scale.

Reassuringly, rETH and frxETH appear to have stabilised following the sharp deterioration observed in December, with liquidity exhaustion now occurring back in the ~2,000–3,000 ETH range. This suggests that the prior deterioration, likely driven by the Balancer exploit and associated deleveraging, was transient.

Notably, dispersion within the collateral set has increased. ETHx has seen a significant reduction in redemption depth, with liquidity exhaustion falling from ~4,000 ETH to sub-1,000 ETH levels, representing one of the most pronounced deteriorations over the quarter. In contrast, OETH has improved considerably and now exhibits the strongest redemption profile in the set, with minimal slippage observed across the tested range. While it is unclear why ETHx liquidity has deteriorated, OETH’s improvements are likely driven by the depth of protocol owned liquidity in the OETH/ETH Curve pool alongside more responsive AMO design, which together provide more consistent exit pathways at size.

Overall, the data indicates that while primary market entry conditions remain strong, exit liquidity across the LST complex is increasingly constrained. This shift is consistent with broader market conditions and reinforces the importance of monitoring redemption pathways when assessing basket construction and compliance with slippage thresholds.

ETHplus Basket

December 2025

Feb 2026

Basket analysis following Q1 Rebalance execution

April 2026

The Q1 rebalance in February 2026 introduced a meaningful shift in basket construction, reducing rETH and frxETH allocations from 21% to 10% each and introducing weETH at 22%, while maintaining stETH at 50% and ETHx at 8%. This improved diversification, with the ratio increasing to 0.68, and initially extended redemption depth to approximately 30,000 ETH. This improvement was largely driven by the combination of weETH’s liquidity depth and its relatively large allocation within the basket.

However, these improvements were not sustained through to the end of the quarter. As shown in the April redemption curves, the deterioration in ETHx liquidity has emerged as the primary constraint, with basket-level redemptions now bottlenecking at approximately 5,000 ETH. This represents a significant compression in effective exit capacity relative to the immediate post-rebalance profile and highlights the sensitivity of the basket to weaker constituents despite relatively small allocations.

In parallel, concentration risk has increased in relative terms. Despite the reduction in frxETH allocation, ETHplus’ share of frxETH total TVL has risen to approximately 6.9%, up from ~4.6% in February, reflecting both reduced external TVL and the fixed notional exposure within the basket. While still within the mandated 10% dependency constraint, this trend moves the basket closer to its limit and warrants continued monitoring.

The yield profile has also weakened over the quarter. The current basket yield stands at approximately 2.55%, with holder yield reduced further to ~2.29% following the increase in protocol take rate from 5% to 10%. This places ETHplus holder yield below its benchmark, with stETH yielding 2.46% over the same period. The decline is driven primarily by reduced rETH yields alongside broader contraction across LST markets.

Overall, while the rebalance improved diversification and initially extended redemption capacity, subsequent market-driven liquidity deterioration and yield compression have offset these gains. The basket now faces three concurrent pressures: reduced effective redemption depth driven by ETHx, increasing proximity to dependency limits in frxETH, and a yield profile that no longer exceeds its benchmark. These dynamics reinforce the need for active monitoring and, potentially, further basket adjustments to restore alignment with ETHplus objectives.

ETHplus - Secondary Market Liquidity

As ETHplus can be entered or exited either through protocol level minting and redemption or by swapping via on chain DEX liquidity, this section focuses on the latter, less discussed pathway: accessing ETHplus through its own secondary market liquidity.

Protocol minting and redemption remain the most efficient route for entering and exiting ETHplus at scale. Slippage stays below the 0.5% threshold for mints well beyond 50,000 ETH and for redemptions up to ~5,000 ETH, in line with underlying collateral constraints.

Secondary market liquidity is far more limited. Entry slippage is ~0.46% at 1,000 ETH and rises steadily, while exit slippage increases sharply, reaching ~4.9% at 1,500 ETH and >30% by 2,500 ETH.

At smaller sizes, DEX routes can remain competitive, but this advantage fades quickly as size increases. The crossover point where protocol routes become more efficient occurs well below 2,500 ETH.

Overall, secondary liquidity is only viable for smaller trades. Beyond this, it becomes the binding constraint, reinforcing protocol minting and redemption as the primary pathway for efficient execution.

Data Collection

All liquidity and slippage data in this report was sourced using Matcha Meta, which aggregates liquidity across multiple solvers and simulates execution outcomes at the time of query. This avoids reliance on static pool snapshots and helps ensure slippage estimates reflect realistic, executable prices across trade sizes.

It should be noted that these results are accurate only at the time of publication. Onchain liquidity remains in a constant state of flux, and execution outcomes may vary materially as market conditions, incentives, and available liquidity evolve.

Conclusion

This report highlights a continued divergence between strong minting conditions and deteriorating redemption liquidity across the LST landscape. While ETHplus remains compliant on diversification and mint-side efficiency, redemption capacity has compressed significantly, with basket-level slippage now breaching the 0.5% threshold at approximately 5,000 ETH.

The Q1 rebalance in February 2026 improved diversification and initially extended redemption depth, supported by the introduction and sizing of the weETH allocation. However, these gains were not sustained through the quarter. Deterioration in ETHx liquidity has emerged as the dominant constraint, reducing effective exit capacity and reinforcing the sensitivity of the basket to weaker constituents.

At the same time, ETHplus’ share of frxETH TVL has increased to ~6.9%, moving closer to the mandated 10% dependency limit, while the yield profile has declined below its benchmark following weaker rETH yields and the increase in protocol take rate from 5% to 10%.

Taken together, the basket is now operating under three concurrent pressures: constrained redemption liquidity, increasing proximity to dependency limits, and a yield profile that no longer exceeds its benchmark. Addressing these in combination will be key to maintaining alignment with ETHplus’ mandate.

Question for governors

Given the current basket profile, how should governors rebalance ETHplus to:

• restore redemption capacity and reduce the ETHx-driven bottleneck
• manage exposure to frxETH to remain comfortably within the 10% dependency constraint
• re-establish a yield profile that is competitive with, or exceeds, the stETH benchmark

How should these objectives now be addressed? Can they be addressed through a single rebalance or are multiple required? Is there an alternative rebalance path that doesn’t see ETHplus sell through constituent collateral DEX liquidity?

[zeb]

@ham

the basket is now operating under three concurrent pressures: constrained redemption liquidity, increasing proximity to dependency limits, and a yield profile that no longer exceeds its benchmark. Addressing these in combination will be key to maintaining alignment with ETHplus’ mandate.

To me it seems a rebalance is the solution? Sounds like the most straightforward way to solve this.

Can they be addressed through a single rebalance or are multiple required?

My hunch is that holders of ETH+ are not overly mercenary and switch up and down every couple days for a couple % points. So multiple slower rebalances would be what I would go for to minimize the liquidity constraints.

[robtg4]

Excellent report. The liquidity analysis is thorough and the three-pressure framing (compressed redemption depth, frxETH dependency creep, yield below benchmark) correctly identifies the structural issues.

What’s missing is a collateral-level risk assessment that goes beyond liquidity mechanics into tokenomic health — because two of the five basket constituents have fundamental problems that liquidity metrics alone won’t surface.

Here’s what the Tokedex framework analysis adds to the picture.

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COLLATERAL ASSET SAFETY TIERS

The Tokedex evaluates each asset through a 16-point Asset Safety Tier system (Framework 25) that scores redemption risk, derivative depth, bridge dependency, regulatory exposure, oracle coverage, volatility, liquidity, and maturity. Lower tier = safer.

Asset	Allocation	Safety Tier	Score	Max LTV (E-mode)	Key Risk Factor
stETH (Lido)	50%	Tier 2	5/16	78%	Queued redemption (days)
weETH (EtherFi)	22%	Tier 3	9/16	68%	Multi-step queued exit, 2 wrapping layers
rETH (Rocket Pool)	10%	Tier 2	5/16	78%	Queued redemption (days)
frxETH (Frax)	10%	Tier 2	5/16	78%	Instant redemption at par
ETHx (Stader)	8%	Not scored	–	–	Not in Tokedex dataset

The weETH allocation is the structural concern. At 22% of the basket and Tier 3 (the only non-Tier-2 constituent), weETH introduces risk properties the other assets don’t carry:

• 2 wrapping layers (depth score: 0.2/1.0). weETH is a wrapped version of eETH, which is itself a restaking derivative of ETH. Each wrapping layer adds a redemption step and a potential failure point. stETH and rETH have 0 wrapping layers — they’re direct staking derivatives.

• Multi-step queued exit with a redemption time score of 0.25/1.0 and a mismatch ratio of 86,400 seconds (24 hours). Under stress, the restaking withdrawal queue compounds the staking withdrawal queue. The report’s finding that weETH liquidity exhaustion dropped from 9,000 ETH to 5,000 ETH is consistent with this structural redemption friction.

• Redemption reliability: 0.25/1.0. The exit path depends on both the EtherFi restaking protocol and the underlying EigenLayer withdrawal mechanics functioning correctly. Compare to frxETH’s instant redemption at par.

The frxETH dependency limit is a real constraint. The report flags ETHplus at 6.9% of frxETH total TVL, approaching the 10% mandate. The Tokedex data shows frxETH has a TVL of only $78.3M — any basket of meaningful size will consume a disproportionate share of frxETH’s total liquidity. The 10% limit isn’t conservative; it’s binding.

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CONTAGION EXPOSURE — THE KELP INCIDENT AS A CASE STUDY

All four scored basket constituents carry a contagion exposure score of 0.85 (CRITICAL band) in the Tokedex systemic dependency framework. The primary driver across all of them: collateral derivative concentration scoring 1.0, the maximum. Every LST in the basket is a derivative of ETH, creating correlated depeg risk — if conditions emerge that cause one LST to depeg, the same conditions likely stress others simultaneously.

The Kelp/rsETH exploit on April 18 is the most recent demonstration. rsETH (a liquid restaking token, same class as weETH) lost backing through a bridge exploit. Within hours:

• Borrowing rates spiked across Aave ETH lending markets
• Lido’s EarnETH vault absorbed $21.6M in rsETH exposure losses
• GGV looped staking strategies were pushed to negative yield
• rETH/ETH pool liquidity on Balancer V3 was affected because boosted pools deposit idle ETH into Aave

The report notes rETH liquidity “stabilised following the sharp deterioration observed in December, likely driven by the Balancer exploit.” But the new Balancer V3 boosted pool architecture means rETH/ETH liquidity now partially depends on Aave lending market health. The Kelp incident stressed exactly that channel. The stabilization may not hold through the next cross-protocol event.

What this means for ETH+ basket construction: correlated stress events affect all LSTs simultaneously, but the redemption pathways differ in speed and reliability. frxETH offers instant redemption at par. stETH and rETH require queued withdrawals (days). weETH requires multi-step queued exits through both restaking and staking layers. Under a correlated depeg event, the 22% weETH allocation becomes the most constrained exit — not because of DEX liquidity, but because the protocol-level redemption path is the slowest and most complex in the basket.

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TOKENOMIC HEALTH OF BASKET CONSTITUENTS

Beyond liquidity, the tokenomic health of the protocols backing each LST matters for long-term basket stability. The Tokedex composite scores:

Protocol	Composite Score	Classification	Stakeholder Alignment
Rocket Pool	72.20	ALIGNED	5/5 — mandatory RPL bonding, three-tier alignment
EtherFi	61.53	DRIFTING	4/5 — restaking incentives but missing Insurance Fund
Frax	50.86	EXTRACTIVE	4/5 — dual-token with frxETH/sfrxETH
Lido	49.21	EXTRACTIVE	1/5 — zero value accrual to governance token holders

Lido at 50% of the basket carries the lowest composite score and the worst tokenomic alignment. The protocol generates $526M+ in annualized fees but provides zero economic value to LDO holders — no fee sharing, buybacks, or burns. This creates a governance fragility risk: the token holders responsible for protocol governance have no economic incentive to govern well, and the Kelp incident just demonstrated that Lido’s Earn products introduce real tail risk to the DAO balance sheet.

Rocket Pool at 10% is the strongest tokenomic design in the basket (72.20, ALIGNED). Mandatory RPL bonding creates structural demand that scales with protocol growth. The 4-ETH bond reduction recently expanded the operator pool. If the next rebalance is an opportunity to adjust allocations, increasing rETH weight and reducing stETH weight would improve the basket’s tokenomic health profile — though liquidity constraints on rETH ($7M pool depth post-Balancer hack) may limit how far that allocation can go.

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RECOMMENDATIONS FOR THE NEXT REBALANCE

Responding to zeb’s question about whether one or multiple rebalances are needed — the data suggests a single rebalance addressing three things simultaneously:

1. Reduce ETHx from 8% to 0% or replace it. Sub-1,000 ETH redemption depth makes it the binding constraint on the entire basket. An 8% allocation creating the bottleneck for the other 92% is inefficient risk allocation. OETH appears to be the natural replacement given its “strongest exit liquidity profile in the test set” — but OETH should be scored through an asset safety tier framework before inclusion.

2. Evaluate weETH at 22%. The report shows weETH liquidity compressing from 9,000 to 5,000 ETH. The Tier 3 safety classification, 2 wrapping layers, and multi-step exit path make it the riskiest component by structural complexity. 22% may be overweight for a Tier 3 asset. A reduction to 12-15% with the freed allocation going to Tier 2 assets would reduce the basket’s aggregate derivative depth.

3. Address the yield question directly. Holder yield at 2.29% below the 2.46% stETH benchmark undermines the value proposition. If ETH+ holders can get better yield by just holding stETH alone, the diversification benefit has to be compelling enough to offset the yield drag. The next rebalance should target constituent yields that produce a blended rate above the stETH benchmark — otherwise the basket is offering diversification at a cost that rational allocators won’t pay.

Full protocol analyses:

• Lido Analysis
• Rocket Pool
• EtherFi

— Robby Greenfield | Tokédex