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Are leveraged restakers profitable after slashing adjustments?
To determine if leveraged restakers are profitable after slashing adjustments, one must use a risk-adjusted return calculation. The simple formula is: The leverage multiplies both the upside and the potential loss. A high leverage factor can make the expected return negative if the Probability of Slash * Loss Given Slash is significant, even if the gross leveraged yield appears attractive. Therefore, leveraged restaking is only profitable after slashing adjustments if the yield premium is sufficiently large to compensate for the massively amplified tail risk, a condition that may not hold in a competitive, efficient market.
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