A 52.63% range and 143% realised volatility meet 1.7x normal volume: how wide to quote
Should the desk widen its spreads and cut quote size for another week to limit inventory losses, or keep normal width and size to capture volume running 1.7 times its prior 12-week average?
The market facts are real; the decision maker is illustrative.
The week and the position
In the week of 13 June 2022, BTC fell 22.58% from 26,574.53 to 20,574.00, with a 52.63% range, a 143.0% annualised realised volatility, and a largest one-hour move of -4.82% early on Saturday. The worst day lost 15.38%; the best day, Sunday, gained 8.45%. Volume reached 24.68 billion USD, 1.7 times the prior 12-week average. The market sat 70.02% below its 52-week high, three of four prior weeks were down, and the close landed in the lower third of the week range. An illustrative market-making desk quotes both sides and needs inventory small.
Judgment
Extra volume pays a desk only if inventory accumulated on one side survives the next move. At 143.0% realised volatility, with -15.38% and +8.45% single days and a -4.82% hour, wide and thin quotes dominate normal ones. Keep quoting both sides, but widen spreads in proportion to the realised hourly moves, cut size, and tighten the inventory band so a single fill cannot leave the desk long into a late-UTC low. Accept the reduced capture of the elevated volume as the price of not carrying it.
What would change it
If hourly realised moves fall back towards the levels of the quieter prior weeks and volume stays above its 12-week average, width and size can return towards normal. If price recovers above the week's open of 26,574.53, the downward skew on long fills can be removed.
What sets this case apart
The volume boom is the trap: high turnover tempts the desk to quote normally while volatility makes any leftover inventory far more expensive than the spread earns.