A 12.32% hour inside a 31.77% week tests a market maker's quote size
Should the desk keep its normal quote size and spreads through hours like Friday's, or cut size and widen spreads whenever funding and volume signal building leverage?
The market facts are real; the decision maker is illustrative.
The week and the position
In the week of 25 January 2021, BTC rose 2.58% but traded in a 31.77% range, from a low of 29,241.72 on Wednesday to a high of 38,531.90 on Friday. The largest hourly move was 12.32%, starting Friday at 08:00 UTC. The week's dollar volume was 25.01 billion, 1.54 times the prior 12-week average. Eight-hour perpetual funding averaged 0.0344% and peaked at 0.1668%. An illustrative market-making desk quotes both sides of BTC and targets small inventory, so a fast one-directional hour leaves it holding stock it did not want.
Judgment
Size every quote so a full two-sided fill can be carried through a 12.32% hour without breaching the desk's loss limit; that means smaller size and wider spreads than a 2.58% weekly return suggests. Eight-hour funding never fell below 0.01% and averaged 0.0344%, so longs paid shorts in every eight-hour window of the week. Accept lower turnover and thinner fills, because a 12.32% hour can leave inventory that no spread posted before that hour offsets.
What would change it
If, over several later weeks, hours with funding near 0.1668% produce no hourly move materially larger than the 0.0344%-funding hours, the size cut can be relaxed. A drop in dollar volume below the 12-week average would also justify normal size.
What sets this case apart
The decision turns on one directional hour's size relative to the desk's inventory limit, not on the week's return or direction.