Whale's Methodology: Investing Through The Lens Of Volatility (II)

2026-02-18 03:30:00 ET

Across most asset classes, historical data show a strong association between high volatility and falling prices. Equities, credit, FX and crypto alike tend to experience non-linear volatility spikes when risk appetite suddenly contracts and prices sell off, typically alongside a marked deterioration in liquidity. While this is often framed as a simple rise in risk aversion, a more informative explanation lies in the interaction between investor behaviour and market microstructure: inflows during uptrends are usually more dispersed and incremental, whereas selling during downturns is more synchronised and more urgent, making "liquidity cliffs" more likely....

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