I agree with the sentiments expressed above that the rewards could be reduced.
However instead of doing an across the board reduction, I think both pools need to be treated differently. Let me explain:
The ETH-sETH2 pool seems in good health to me, the trading fee is 0.3%, it generates some natural gains. The sETH2 gains staking rewards while the ETH does not. The Swise rewards need to compensate for forfeiting staking rewards on the ETH part - which could also be staked instead. From where we are now in terms of rewards, I think this leaves us quite a bit of room to play.
The rETH2-sETH2 pool on the other hand has two issues in my view, the first is that the trading fee is low at 0.05%, I doubt that claiming the trading fees is even profitable for most LP providers. The second problem is that there is no upside to owning rETH2, you can’t restake it like ETH. The only upside to owning rETH2 is to claim the rewards in this pool. Without it the price of rETH2 would collapse.
We could move the rETH2-sETH2 pool to a 0.3% fee pool as well, but I think this is rather cumbersome and requires people to move their liquidity.
This is all to say that we should tread carefully, and reduce rewards slowly.
My suggestion would be to take the following first step:
We still pass the current proposal for the coming period, but from next month on, we reduce the reward on the ETH-sETH2 pool by a third to 4,000,000 and reduce the rETH2-sETH2 pool by 20% to 400,000 (a smaller reduction).
Then see how it goes, paying careful attention to the rETH2-sETH2 pool, before deciding on future rewards.