15 May 2022
Intraday volatility reached May 2021 highs on Thursday last week
Thursday last week was far more volatile than what we express using day-to-day daily price changes.
Our usual volatility chart has some weaknesses. It neglects intraday volatility. As a workaround, to compare this Thursday to previous erratic days in the market, we’ve examined the average hourly high low difference in BTC both in the spot market and in perps.On Thursday, May 12th, each hour on average saw 3.68% deviations between the high and low prices in the spot market. The intraday volatility has not been this high since May 20th, 2021.Only seven days since January 1st, 2020, have seen larger average intraday movements in price. March 13th* is by far the most extreme day in terms of intraday volatility. Also, the extremely brutal markets last May are noteworthy, seeing three consecutive days of intraday volatility higher than what we saw on Thursday.In general, days of high intraday volatility tend to occur during steep sell-offs. The short squeeze on July 26th is one of few up-days in the markets with extremely elevated intraday volatility. The key contributor to surging intraday volatility tends to be massive destabilizing effects in derivatives with leveraged positions unwinding, causing knock-off effects in all associated markets.Surprisingly, the spot market tends to see more extreme differences in times of stress compared to perps. We are surprised by these results, as we expected liquidations to generate more extreme deviations in perps. Nevertheless, the available liquidity in perps might lead active market participants to react more efficiently during growing volatility, while spot markets react less swiftly to sudden shocks.