Rebalancing is the correct term of art here. The index reweights, the fund rebalances its holdings in order to track the new reweighted index. Source: traded a lot of index funds.

Also, based on the blog post, the fund (or the index managers, who are the same people here) would say they are rebalancing in your sense of the word too. They are adding diversification compared to a portfolio that just holds, say, bitcoin. Sure, it's not as diverse as one that also holds stocks and bonds and real estate, but nobody's perfect.