Liquidity Will Drop By 50% At VIX 20
"given the low levels of volatility and high levels of leverage, the main risk for the market remains a potential volatility shock."
"It is this relationship between market volatility and liquidity that leads to increases in ‘volatility of volatility’ (i.e. alternating periods of extremely low and extremely high volatility)."
Volume, volatility and liquidity are all inextricably linked to create the illusion:
Declining volume (blue line) leads to declining volatility, giving the illusion of liquidity at market tops:
Volume moving averages (blue/red) with the Volatility Index (VIX):
Bollinger band width aka. volatility