THICC

THICC — Information propagation drives volatility autocorrelation.

[THICC @thiccythot_]

$THICC LIVE

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THICC explores how information moves through markets and how that propagation shapes volatility. Liquidity matters, but information is what drives the deeper market dynamics.

[jeff.hl @chameleon_jeff]

7/ This is counterintuitive, and yes liquidity does dry up during high volatility like @thiccythot_ mentioned.

However in aggregate (dollar-weighted) non-quant actors trade on price, not size. Illiquidity amplifies the jitter but isn't the root cause.

[jeff.hl @chameleon_jeff]

6/ There are structural causes for short term volatility autocorrelation too. A well known exacerbating factor is triggering cascades of stop loss orders. Where u at tabasco?

But in general, MMs and quant traders actually serve to *increase* the viscosity of the "fluid."

[jeff.hl @chameleon_jeff]

5/ This human disagreement dance is the primary factor for volatility autocorrelation.

E.g. twitter traders might buy because #moneyprinter baby, past the macro-BTC correlation the tradfi folks are using. The price will settle at a dollar weighted average of their opinions

[jeff.hl @chameleon_jeff]

4/ At the optimal frontier of sophisticated trading, the fastest are the dumbest. When prices are wrong you just need to get fills.

There is always alpha pushing the price towards fair. Human traders think and adjust. Inverse correlation between time spent thinking and smartness

[jeff.hl @chameleon_jeff]

3/ Markets are where self-interested actors come together in a dance of price discovery. A simple example, let's say CPI prints lower than expected.

First NLP strategies parse headlines and slam BTC books. Hard coded triggers, for example 6% inflation -> BTC +2%.

[jeff.hl @chameleon_jeff]

2/ In this analogy, the autocorrelation of volatility is the amplitude decaying over time at rate proportional to viscosity. It's intuitive if you think about dropping heavy objects into liquid.

The viscosity parameter is the efficiency of the market. What are its components?

[jeff.hl @chameleon_jeff]

1/ Liquidity is definitely a factor but the fundamental reason for volatility autocorrelation is information propagation.

One mental model for markets is a viscous fluid. Shocks to the system play out as damped oscillations in the price discovery process.