@l847852k

What stress scenarios break high-leverage restaking setups? High-leverage restaking setups are broken by scenarios involving correlated adverse events. The most lethal is a "Double Whammy": a correlated slashing event across multiple major AVSs, combined with a significant drop in the ETH price. The slashing erodes equity, forcing leveraged positions toward liquidation, while the falling ETH price simultaneously pushes loan collateral ratios below their liquidation thresholds from the other direction. A Liquidity Crisis is another break scenario: a sharp drop in AVS yields makes it impossible to service borrowing costs, forcing voluntary unwinding that turns into a disorderly rout. Finally, a Sequential Cascade, where a small slash triggers liquidations that depress ETH price, which triggers more liquidations, can destroy even moderately leveraged setups in a feedback loop.

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