Watery Grave is a naturally occurring structure found in the Shipwrecked DLC. They can be found in the dark colored ship graveyards in the Ocean. They can be fished out of the water. Collecting them costs 10 sanity. When retrieved, they have a 10% chance to spawn a Pirate Ghost. Otherwise, they will always yield a Seaweed. In addition, they may yield a Coral (75% chance) and a random Trinket (50% chance). If the Bone Key, one of the keys needed to unlock playable Woodlegs character, does not exist in the world yet, each Watery grave also have a chance to contain it. This chance is equal to 1 / (Number of Watery Graves left in the world), meaning the key is guaranteed to be obtained by fishing all the Watery graves.
During Full Moons, Watery Grave will spawn a Pirate Ghost.