Summary
A proposal to:
- Increase the supply cap of wrsETH on the Base Instance
- Increase the supply cap of weETH on the Ethereum Core Instance
- Increase the supply cap of PT-sUSDe-9APR2026 on the Plasma Instance
All cap increases are backed by Chaos Labs’ risk simulations, which consider user behavior, on-chain liquidity, and price impact, ensuring that higher caps do not introduce additional risk to the platform.
wrsETH (Base)
wrsETH on Base has reached 99% of its supply cap following an inflow of over 7,000 tokens in the recent 48 hours.
Supply Distribution
While the market has expanded substantially since our last review, the distribution of suppliers has persisted. Effectively, the market is comprised of two users, both of which participate in leveraged restaking by collateralizing WETH debt with wrsETH, thereby leveraging the spread between the rates. As can be observed, the health factors of the positions are tightly concentrated around 1.03, typical for such markets.
Given the high correlation of the assets, the liquidation risk is minimal and can occur primarily due to interest rate accrual.
Liquidity
The majority of wrsETH liquidity on Base is currently deployed in the wrsETH/wstETH Aerodrome CLAMM pool with a TVL of $2 million. Additionally, the team has bootstrapped a Uniswap v4 pool, which facilitates a highly capital-efficient execution of the orders. Specifically, the projected slippage on a 350-token sell order currently stands at 50 basis points, allowing for a substantial increase in the supply cap.
Recommendation
Given the increased liquidity, which provides substantially better execution, the market’s risk has been substantially reduced; therefore, we recommend increasing the supply cap of wrsETH on Base.
weETH (Ethereum Core)
weETH has reached 98% of its 2,200,000 token supply cap, which at current prices is valued at approximately $7.3 billion. Since December 1st, the supply has expanded by over half a million tokens, signalling increasing demand to utilize weETH in leveraged looping strategies. The increased demand has coincided with a net growth in WETH deposits; hence, borrowing costs remain compressed, resulting in an elevated spread in the leveraged restaking strategies.
Supply Distribution
The supply distribution of weETH is moderately concentrated; the top supplier represents 27% of the total supply, while the top ten users account for 68%. As can be observed on the plot below, the majority of the suppliers are utilizing weETH to underwrite WETH debt, such that recursively leveraged strategies aim to maximize the exposure to the net positive spread between the borrowing costs of WETH and the underlying yield of weETH.
While the health factors of users are primarily in a range considered risky, the employed strategies substantially decrease the probability of liquidations due to the tight correlation between wrsETH and WETH prices. Additionally, uncorrelated debt currently represents less than 6% of the total.
Liquidity
weETH’s liquidity profile on Ethereum has exhibited substantial stability in the recent 3 months. At the time of writing, a sell order of 10,000 weETH for WETH would be subject to a conservative 2% slippage.
Recommendation
Considering the compressed borrow costs of WETH, along with high revenue-generating properties of weETH, along with conservative user behavior and favorable liquidity conditions, we recommend expanding the supply cap of the asset.
PT-sUSDe-9APR2026 (Plasma)
PT-sUSDe-9APR2026 reached its 200 million token supply cap on the Plasma instance shortly after being doubled, underscoring strong market appetite for looping strategies centered around this maturity.
Supply Distribution
The supplier distribution of PT-sUSDe-9APR2026 shows moderate concentration, which is typical for newly listed, highly competitive markets where sophisticated participants allocate capital immediately upon cap raises. A substantial share of demand originates from users transitioning exposure from the 15JAN maturity, most notably the largest supplier, which rebalanced over 60 million PT-sUSDe-15JAN2026 into the April maturity. Users are predominantly borrowing USDT0 and USDe against PT collateral, recursively scaling exposure to enhance net returns.
Liquidity
Current on-chain liquidity for PT-sUSDe-9APR2026 on Pendle is sufficient to absorb sizable unwinds. Specifically, the AMM can execute a sale exceeding 25 million PT-sUSDe-9APR2026 into USDT0 with approximately 1.8% slippage.
Recommendation
In light of sustained demand for PT-sUSDe-9APR2026 looping, conservative user positioning, limited liquidation risk, and substantial on-chain liquidity, we recommend increasing the supply cap of PT-sUSDe-9APR2026 on the Plasma instance.
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap |
|---|---|---|---|
| Base | wrsETH | 20,000 | 30,000 |
| Ethereum Core | weETH | 2,200,000 | 2,600,000 |
| Plasma | PT-sUSDe-9APR2026 | 200,000,000 | 400,000,000 |
Next Steps
We will move forward and implement these updates via the Risk Steward process.
Disclosure
Chaos Labs has not been compensated by any third party for publishing this AGRS recommendation.
Copyright
Copyright and related rights waived via CC0.