Fairy wrasse turning white?

Oh boy, where to start!

First, raven's link does NOT show an exquisite (that's actually a yellow-fin fairy).

Second, Cirrhilabrus (Fairy wrasses) do NOT bury in the sand bed. They may sleep on the sand bed, maybe under a rock, but the do not bury like the Halichoeres genus does.

Third, the coloration you're concerned about is nothing to be concerned about, as others have said. This is just "night camouflage", if you will. It's really the blood leaving the tissue around the scales.

Fourth, the Cirrhilabrus genus does "blow" themselves a mucus cocoon when the sleep. It's nearly a transparent bubble which surrounds them and isn't exceptionally visible. This is to cover their scent.

Finally, here's a few good examples of the different regional colorations of the exquisite: Saltwater Aquarium Fish for Marine Aquariums: Exquisite Fairy Wrasse - Reef Safe

 

this is him.

I actually found this mucousy looking thing this morning. Coming off from where he hides.

So I guess that's it, he does sleep on the sand bed under a rock which I just found to be so weird