This past weekend, Set Protocol’s first rebalances were completed; a huge milestone for us and the Set community. We want to thank our early users of Set for being a part of the first ever rebalances done on our production contracts.
- Sets Rebalanced — Due to the recent price increases of Bitcoin, the BTC Enthusiast, ETH Enthusiast, BTC Range Bound Low Volatility, and BTC Range Bound High Volatility Sets had sufficient price movement for rebalances to be initiated and completed.
- Time to Rebalance — The rebalance process for each Set took about 20 hours to complete, which is composed of an 8 hour proposal period and 11–12 hour rebalance period.
- No Slippage — There was 0% slippage during the rebalance. If you are a Set holder of one of the rebalanced Sets, there was no value lost from your Sets during the rebalance.
Historical rebalances are now on TokenSets on each Set’s detail page!
Frequently Asked Questions
What is rebalancing?
Rebalancing is the process of updating the weights of a Set to enact a predetermined portfolio strategy or desired asset allocation. Rebalances are performed to prevent Sets from straying from its intended strategy or allocation.
The BTC Enthusiast and ETH Enthusiast Sets were rebalanced to return to their target BTC and ETH allocations. The BTC Range Bound Low and High Volatility Sets were rebalanced to capture the price increases in BTC into the non-volatile asset, DAI.
Is rebalancing a taxable event for me?
Taxes vary greatly by jurisdiction. For any financial, tax, or legal matters, we recommend consulting your own professional. While we cannot provide tax guidance, users should be aware that they may recognize short or long term capital gains or losses when selling Sets they’ve acquired.
What are the requirements for a rebalance?
As an end user, you don’t need to do anything. The rebalances are handled automatically without any action that needs to be taken by you.
As for the Sets, are two requirements that are needed in order for a rebalance to occur:
- Rebalance Interval — Typically, portfolios are rebalanced periodically. Each Set has a defined minimum rebalance interval or the minimum time elapsed since the last rebalance. For the Enthusiast Sets, the minimum is 30 days — targeting a monthly rebalance. For the Range Bound strategies, the minimum is 14 days.
- Price Drift — There must be sufficient percentage drift from the intended allocation before a rebalance can occur. For the Enthusiast Sets, the tolerance / drift is 2%. For the Range bound strategies, the tolerances will vary based on the asset due to differences in price volatility.
How does Rebalancing work?
On a high level, the rebalancing process involves a proposal step and the actual rebalance itself.
- Proposal Period — A period where a new allocation is proposed, and users are given a time buffer to opt out of the rebalance if they choose not to have their Sets rebalanced.
- Rebalance Period — A period where the over-collateralized assets are traded out for the under-collateralized asset, returning the weights back to their target allocations.
The total rebalance time is made up of the proposal period and the time to complete the auction. The current Set’s proposal period are currently 8 hours and the entire auction is set to complete in about 12 hours.