How Does the Concept of ‘Reflexivity’ Apply to the Death Spiral of a Native Token Used as Collateral?

Reflexivity is a self-reinforcing feedback loop where price movements influence market fundamentals, which in turn amplify the original price movement. In a death spiral, a small price drop leads to liquidations (a fundamental change), which increases selling pressure, causing a larger price drop.

This cycle is reflexive because the price and the fundamentals (collateral health) are constantly influencing each other downwards.