🚨Exit Queue Death Spiral🚨 Day 15 post-Shanghai Your staked ETH withdrawal is finally ready For 2 weeks, withdrawn ETH has been steadily sold in the illiquid spot market, with price bleeding down 75 days of validators are waiting in the exit queue behind you What do you do?

This is the Exit Queue Death Spiral If you know what “!pray” means, you know how this exact exit queue scenario played out for Temple Even ETH diehards who don’t want to sell will have every incentive to do so to avoid being dumped on by the next person behind them in the queue

The paradox of the Exit Queue Death Spiral is that many of the withdrawing validators may be ETH maxis who want to hodl/re-stake, but it may still be a game theory optimal decision for them to sell and re-buy later once ETH price has decreased and the exit queue has cleared

Just as there are always new sellers as a token’s price decreases (more holders go underwater or sell out of fear of going underwater), an exit queue creates a perverse incentive for even protocol supporters to dump their beloved tokens out of self-defense - a snowballing effect

The takeaway is that the first few days of ETH price action after Shanghai on April 12 will be critically important to the decision-making incentives of the next withdrawing stakers in the queue And unfortunately, the stakers at the front of the queue are the most likely to dump

So as the first withdrawing stakers dump, there is a real possibility of creating a downward rolling snowball of compounding negative price action, a self-fulfilling death spiral that leads to ever more dumping

And keep in mind, this doesn’t include the ~1.1 million ETH rewards (partial withdrawals) that will unlock over days 1-5 post-Shanghai, which are much more likely to be sold than withdrawals, and may generate enough momentum in the initial days to start the downward spiral 🌀✌🏻