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What derivatives create feedback loops with AVS slashes?
Several derivatives create dangerous feedback loops with AVS slashes:
Leveraged LST Positions: As discussed, borrowing against LSTs to restake again creates a direct loop between slashing and liquidation.
Perpetual Futures: Large leveraged long positions on ETH or LSTs can get liquidated if a slash triggers a market-wide price drop, adding sell pressure.
Options Writing: Entities writing (selling) covered call options on their LSTs may be forced to buy back those options at a loss during a volatility spike post-slash, creating additional selling pressure.
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