I agree move him out the light and make sure its gets a good medium flow. It will come back in no time. I had one a few years ago that a flame angel ate most of the flesh. I moved it to another tank let it heal up a little and fed it everyother night within a month I saw a major recovery. If you dont suspect a fish or critter eating the flesh monitor it. If it gets worst I would do a Lugols dip. Keep us posted.
Good to know that it can recover. I really like this piece. It definitely wasnt the light. I had this guy in the shade. It could have been the flow, but would it have been that fast of a recession? I have no fish in the tank. They are in QT. The only thing in the tank is a cleaner shrimp and a few peppermint shrimp.
I just thought of something else I did to a couple of mine last year. You didn't do any cleaning of salt creep last night did you? I had a chunk of salt creep from one of my lights get down and lay on top of a couple chalice frags last year and burned the snot out of them.
I actually did a small water change last night and when I was done pouring in the bucket of water, some unmixed salt did fall in the tank right in the area of the chalice. That makes me feel better. At least I know it was my fault and not something out of whack in my tank. Good call Larry!